Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. Technical Analysis of the Futures Markets In its purest form, technical analysis considers only the actual price behavior of the market or instrument, based on the premise that price reflects all relevant factors before an investor becomes aware of used among traders and financial professionals, and some studies say its use is more widespread than is fundamental counterpart.
CFD Technical Analysis
When Trading contracts for difference, technical analysis can be conducted on the underlying instrument that you are trading as analysis as the price follows the movement in this asset. The key difference when trading contracts for difference to normal securities is the hold time of the purchase
CFDs are usually much shorter term purchases than equities, thus identifying an upward or downward trend may not be as useful because you could experience a significant opposite movement in price over the short term which would cause you to trigger your stop and close your position, turning the trade into a loss, where in the long run the identified trend may hold up.
Due to this reason, most technical analysis is focused on futures or day trading techniques.
Equities Technical Analysis
- Accumulation/distribution index—based on the close within the day’s range
- Average true range – averaged daily trading range
- Bollinger bands – a range of price volatility
- Breakout – when a price passes through and stays above an area of support or resistance
- Elliott wave principle and the golden ratio to calculate successive price movements and retracements
- Hikkake Pattern – pattern for identifying reversals and continuations
- MACD – moving average convergence/divergence
- Momentum – the rate of price change
- Money Flow – the amount of stock traded on days the price went up
- Moving average – lags behind the price action
- On-balance volume – the momentum of buying and selling stocks
- PAC charts – two-dimensional method for charting volume by price level
- Parabolic SAR – Wilder’s trailing stop based on prices tending to stay within a parabolic curve during a strong trend
- Pivot point – derived by calculating the numerical average of a particular currency’s or stock’s high, low and closing prices
- Point and figure charts – charts based on price without time
- Profitability – measure to compare performances of different trading systems or different investments within one system
- Relative Strength Index (RSI) – oscillator showing price strength
- Resistance – an area that brings on increased selling
- Rahul Mohindar Oscillator – a trend identifying indicator
- Stochastic oscillator, close position within recent trading range
- Support – an area that brings on increased buying
- Trend line – a sloping line of support or resistance
- Trix – an oscillator showing the slope of a triple-smoothed exponential moving average, developed in the 1980s by Jack Hutson
FOREX Analysis
Commodity Analysis
- Commodity Channel Index – identifies cyclical trends