Building Blocks of Technical Analysis

To perform Technical Analysis, one will have to rely on a number of tools and concepts. Generally, as reliable as a tool can be, it is susceptible to generate false signals and no technician would only rely on any one single tool. Typically, a number of tools will be used to confirm a trading signal before a technician decides to take action.

Charts

The first decision is the choice of charts to use. Line charts are constructed by connecting, typically the closing price of the period, to plot a smoothed line. Bar charts and candlestick charts are the more popular charts that technicians use today as they incorporate more information such as the period’s open, high and low. With bar charts and candlestick charts, by studying chart formation or each single period, or a combination of multiple periods, can provide valuable insights to the market psychology for the period under review and it can also provide trading signals for the technician.

Next: Building Blocks of Technical Analysis: Trendlines


    Table of Contents
  1. Introduction
  2. Technical Analysis Explained
  3. Building Blocks of Technical Analysis: Charts
  4. Building Blocks of Technical Analysis: Trendlines
  5. Building Blocks of Technical Analysis: Moving Averages
  6. Building Blocks of Technical Analysis: Indicators - RSI
  7. Building Blocks of Technical Analysis: Indicators - Bollinger Bands
  8. Building Blocks of Technical Analysis: Indicators - MACD
  9. Building Blocks of Technical Analysis: Price Patterns - Reversal Patterns
  10. Building Blocks of Technical Analysis: Price Patterns - Continuation Patterns
  11. Conclusion
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