The Beginner’s Guide To Trading Using Technical Analysis

I’ve written a lot of really good content on technical analysis over the past couple of years, and I figured it was time to put it all the best content into one place, so that anyone who was starting out trading would have a simple beginner’s guide. The goal is that you would be able to learn the basics on the major technical analysis indicators.

So it is after more than 3 hours of pulling it all together. A collection of the finest guides, tutorials, videos, articles; complied together in the order that they should be read.

Click the titles for the full articles. Let me know what you think via the comments!

Why Technical Analysis Is Superior

Technical analysis is the superior way for investors and traders to make decisions when trading stocks and options. For many option traders, technical analysis gives much clearer entry and exit signals for making money in the markets. While it’s true that some investors dismiss technical analysis as inconclusive and arbitrary, the fact remains that technical analysis (when used properly) has a lot of empirical evidence to support it as a reliable trading tool.

Support And Resistance

One of the most difficult concepts for beginning traders and some professionals alike is the understanding of simple support and resistance levels. As such, we decided to provide this very simple explanation of support and resistance levels to help you “get over the hump.”

Moving Averages

Moving averages are very popular among beginning traders and investors. They are simple to use and give very easy indicators to buy/sell a stock. The 200-day moving average is generally the most talked about along with the 50-day moving average. Moving averages do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices – which is mainly why the are not a great short term trading indicator.

Bollinger Bands

Bollinger are one of the most popular technical studies used today. They are simple and give clear signals which is why so many traders use them on a daily basis. However, their relation to volatility and prices moves may reveal some shocking discoveries. Or at the least give you a little more understand of how they REALLY work in today’s fast moving market.

Relative Strength Index (RSI)

RSI is a momentum indicator or oscillator that measures the speed and change of price movements in a security. Traditionally it will move between 0 and 100. It is usually considered that the stock is overbought when RSI is above 70 and oversold when RSI is below 30.

Fibonacci Retracements – Fans, Arcs, Time Series

Fibonacci retracements, fans, arcs, and time series are some of the best technical analysis tools for traders. They are not a perfect indicator (what is right) but they are very helpful if you know the basics.

Ribbon Studies

Ribbon studies and multiple moving averages are becoming more and more popular among trend traders. The basic idea behind the technical indicator is that you are using roughly 12-16 different moving averages on the same exact chart (instead of using just 1 or 2 on your chart).

Moving Average Convergence/Divergence (MACD)

Whipsaw trading can really put a damper on your portfolio, so let’s take a step back right now and do a quick mini-lesson on technical analysis and MACD Divergence. After looking at charts for the past 5 days sitting on mostly all cash heading into expiration, I’ve noticed that the technical are flashing some important warning signs. Mainly I’m seeing a whole bunch of divergence.

About The Author

Kirk Du Plessis

Founder and head trader for Option Alpha, husband, new father and options trading coach.

  • JETWAKE GLOBAL

    Excellent as always! Wishing you a happy holiday season Kirk! Cheers!

  • Mark Moses

    Very useful for us beginners. Helps me understand the overall purposes of these charts and indicators. Thanks for putting it together. While technical analysis seems superior, I’m curious to know if you have favorite sources for fundamental market analysis, given the magnitude of recent global events and economic crisis?

  • Greg Seymour

    Incredible summary. Have tagged this for future reference, Greg

  • http://www.springcypressappliance.com Appliance Repair Cypress TX

    This is a great post. I love trading options and stocks. I have been trading the 10 SMA crossover of a 30 day EMA. Thanks for this site. Great articles!

  • http://optionalpha.com/ Kirk Du Plessis

    Hey Bob, which guide are you trying to get to or video tutorial? Since some areas are protected under the membership we can offer a big search function unfortunately.

    • Bob

      Kirk,

      I clicked on a link under “Week 2″ of the “Fast-Track-8-Week-Options-Hacking-Guide.pdf” which brought me to your article titled “The Beginner’s Guide To Trading Using Technical Analysis”. At the bottom part of that webpage, there is a brief summary of MACD. The title of the summary called “Moving Average Convergence/Divergence (MACD)” was a link, so I clicked on it to get to the full article as suggested on that webpage. That is when I ended up on a signup or log in page. Since I was already logged in, I had no idea how to get to that article. I am trying to get to that article on MACD from the link that I clicked on.

      • http://optionalpha.com/ Kirk Du Plessis

        Ah yes I see now. That post that was linked was a much much older post that we removed so the website just sends you back to the homepage. However we did add a cool new search feature inside the membership homepage where you can search MACD for all the relevant articles.

      • Bob

        Thanks Kirk,

        I never even saw that search window in the membership homepage until you just mentioned it. This is really cool. Thanks again.

      • http://optionalpha.com/ Kirk Du Plessis

        After your suggestion I figured out a way to added and bought some plugin software to do the trick!