Technical Analysis, What Is Technical Analysis?

[ayitin69]

Technical analysis is a method of forecasting price movements by looking at purely market-generated data. Price data from a particular market is most commonly the type of information analyzed by a technician. The bottom line when utilizing any type of analytical method, technical or otherwise, is to stick to the basics, which are methodologies with a proven track record over a long period. After finding a trading system that works for you, the more esoteric fields of study can then be incorporated into your trading toolbox.Almost every trader uses some form of technical analysis. Even the most reverent follower of market fundamentals is likely to glance at price charts before executing a trade. At their most basic level, these charts help traders determine ideal entry and exit points for a trade. They provide a visual representation of the historical price action of whatever is being studied. The building blocks of any technical analysis system include support/resistance, price charts, volume charts, and technical indicators that include trend indicators, momentum indicators, volatility, cycle, etc.

 

[ayitin69]

Combining Technical Analysis with other Market Forecast Methods

Combining Technical Analysis with other Market Forecast Methods

John Murphy in his book "Technical Analysis of the Financial Markets", says that the principal sources of information available to technicians are price, volume and open interest. Other data, such as indicators and sentiment analysis are considered secondary.

However, many technical analysts reach outside pure technical analysis, combining other market forecast methods with their technical work. One such approach, known as Fusion Analysis overlays fundamental with technical analysis, in an attempt to improve portfolio manager performance. Another advocate for this approach is John Bollinger, who coined the term Rational Analysis as the intersection of technical analysis and fundamental analysis

Technical analysis is also often combined with quantitative analysis and economics.For example, neural networks may be used to help identify intermarket relationships. A few market forecasters combine financial astrology with technical analysis. Chris Carolan's article "Autumn Panics and Calendar Phenomenon," which won the Market Technicians Association Dow Award for best technical analysis paper in 1998, demonstrates how technical analysis and lunar cycles can be combined.

Investor and newsletter polls, and magazine cover sentiment indicators, are also used by technical and market analysts.

What do you say about this? Your comments and questions are welcome.

 

[ayitin69]

Systematic trading and technical analysis

Neural networks:
Since the early 90's when the first practically usable types emerged, artificial neural networks (ANNs) have rapidly grown in popularity. They are artificial intelligence adaptive software systems that have been inspired by how biological neural networks work. Their use comes in because they can learn to detect complex patterns in data. In mathematical terms, they are universal non-linear function approximators meaning that given the right data and configured correctly, they can capture and model any input-output relationships. This not only removes the need for human interpretation of charts or the series of rules for generating entry/exit signals but also provides a bridge to fundamental analysis as the variables used in fundamental analysis can be used as input.

In addition, as ANNs are essentially non-linear statistical models, their accuracy and prediction capabilities can be both mathematically and empirically tested. In various studies neural networks used for generating trading signals have significantly outperformed buy-hold strategies as well as traditional linear technical analysis methods.

While the advanced mathematical nature of such adaptive systems have kept neural networks for financial analysis mostly within academic research circles, in recent years more user friendly neural network software has made the technology more accessible to traders.
What is your view?

 

[ayitin69]

Use of technical analysis

Many traders say that trading in the direction of the trend is the most effective means to be profitable in financial or commodities markets. John W. Henry, Larry Hite, Ed Seykota, Richard Dennis, William Eckhardt, Victor Sperandeo, Michael Marcus and Paul Tudor Jones (some of the so-called Market Wizards in the popular book of the same name by Jack D. Schwager) have each amassed massive fortunes via the use of technical analysis and its concepts. George Lane, a technical analyst, coined one of the most popular phrases on Wall Street, "The trend is your friend!"

Many non-arbitrage algorithmic trading systems rely on the idea of trend-following, as do many hedge funds. A relatively recent trend, both in research and industrial practice, has been the development of increasingly sophisticated automated trading strategies. These often rely on underlying technical analysis principles.
How about this? Do you make trend your friend?

 

[ayitin69]

Technical Analysis Strategy:

1: Stochastic with Fibonacci
Every Forex trader know the power of Fibonacci numbers and Stochastic in Forex Market, both are very popular and powerful indicator in the Forex market. Here we are going to combine both to make them more powerful.
What we required?
1) Two stochastic slow indicator with setting Red (14, 3, 3) and Green (5, 3, 3).
2) Fibonacci with level 200, 176.4, 161.8, 150, 138.2, 123.6, 100, 76.4, 61.8, 50, 38.2, 0, -23.6, -38.2, -50, -61.8, -76.4, -100.
3) Three different time Forex chart 30M, 1H and 4H.
Set-up (use GMT 00:00 and 24:00)
Draw Fibonacci line from the previous day's low to the high and draw it so the level lines extend into today (Yesterday is between 0:00 GMT and 24:00 GMT). Always Fibonacci level 0 should be at low and Fibonacci level 100 should at high. Don’t consider market trend while drawing Fibonacci line, just draw from low to high.
One example for discussions. Other examples may be given in due course.