Technical analysis is a means of studying price and volume changes over time to forecast where a security might trade in the future. The primary goal of technical analysis is to discover areas of strong support/resistance imbalances in the market.
If a trader can discover where buyers will be heavily present with demand or where sellers will be heavily present with supply, then he can take positions in the market accordingly. As an options trader, technical analysis is one of the bedrock skills you need to master.
Despite being inundated with data, charts, volume, statistics, etc., technical analysis is really about studying human behavior – specifically the behavior of investors with respect to fear and greed. Over time, these repeatable patterns and cycles can be plotted and tracked to predict future possible price movements on a consistent basis. Thus, a stock’s price change over time is the most accurate record for the emotional state of market participants.
There are many ways to profit with technical analysis: candlestick patterns, volume indicators, sentiment indicators, chart patterns, etc…and yet a lot of traders are still confused about the entire concept. So we put together this quick 10-part tutorial that walks you through some of the more popular technical analysis indicators:
- Shocking Secrets About Bollinger Bands And Market Volatility
- 13 Stock Chart Patterns That You Can’t Afford To Forget
- Three Stick Candlestick Patterns That Are Profitable For Market Turns
- How To Analyze Trend Changes With Ribbon Studies
- 5 Steps To Trading Success – Let Technical Analysis Be Your Guide
- Why Some Indicators Are Wrong In Predicting Tops And Bottoms
- The Ultimate Guide To Market Breadth With The McClellan Oscillator
- Little Known Ways To Successfully Paper Trade Options
- How To Use The 200-Day Moving Average For Trend Trading
- Basics of Fibonacci Retracements, Fans, Arcs, and Time Series
Remember, there are literally thousands of indicators that traders can use in technical analysis, and there is really an ever growing number because traders are always inventing new ones to fill current gaps. Options traders that have the most success tend to stick to an approach that focuses on a handful of reliable indicators.
And there’s a lot more to discover about effective technical analysis trading, so take a second to sign up for free updates from Option Alpha to learn more.