33+ Articles About Technical Analysis

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Contents

How to Do Technical Analysis

Updated: August 8, 2020 | References

Technical analysis evolved from the stock market theories of Charles Henry Dow, founder of the Wall Street Journal and co-founder of Dow Jones and Company. The goal of technical analysis is to predict the future price of stocks, commodities, futures and other tradeable securities based on past prices and performance of those securities. Technical analysts apply the law of supply and demand to understand how the stock market and other securities exchanges work, identifying trends and profiting from them. The following steps will help you understand technical analysis and how it is applied to choosing stocks and other commodities.

19 Technical Analysis Facts You Should Know

Technical analysis is my approach to the markets without the use of a multitude of trading indicators. You can see how I use simple technical analysis ideas every week in my free Forex setups that I send out.

Why do I use simple things like breakouts and pullbacks in my technical analysis approach? Because they work.

They don’t just work in theory, they work from a quantitative standpoint.

The natural evolution of price involves consolidations and momentum. I classify everything that is not trending at a certain point, consolidations. Even pullbacks are considered as such to simplify everything at a high level.

I will then break price down in terms of mean reversion (which can be traded), momentum back in the direction of the trend, and finally typical breakout scenarios.

This post is not a full technical analysis tutorial but will give you an overview of technical analysis.

I’ve also linked to some amazing resources at the end which you can read for further study on technical analysis.

1. Definition Of Technical Analysis?

Technical analysis is a method for forecasting of future direction of price movement based on the study of past market data. This market data is mainly price and at times can be volume as well. I don’t use volume when in actual trading decisions when I am trading futures.

2. What Is A Technical Analyst?

Anyone who researches and analyzes the market based on past price data as well as technical indicators could be considered a technical analyst as opposed to a fundamentalist. Technical Analysts are also called technicians.

If you learn about price action trading, chart patterns, candlesticks, Forex indicators and use them in your trading later on, then you are a technical analysts.

Why? Because you are basing your trading decisions (to buy or sell) on the technical analysis you have done.

3. What Do Technical Analysts Believe In?

There’s one important thing (pure) technical analysts believe in and this is it: that price movements are the result of supply and demand forces in the market for any given currency pair. They also believe that patterns repeat themselves and the much of the information that can affect price is already known.

This belief system makes technical analysts completely opposite to fundamental analysts.

4. Do You Know What Is Price In Forex Technical Analysis Context?

Price is simply the combination of open, high, low or close of a currency pair over certain period of time. This time can be 1 minute, 15 minutes, 30 minutes, 1 hour, 4 hour, daily, weekly or monthly price data if you intend to use MT4 Trading Platform.

Price over time is represented by charts. I will get to the topic of charts below.

5. What Is The Difference Between Technical Analysis Vs Fundamental Analysis?

Here are the main differences between technical analysis and fundamental analysis…

Technical Analysis:

  • technical analysis starts with a chart.
  • technical analysts take a much shorter time horizon to do their technical analysis using time frames from a week, days, hours and even minutes.

Fundamental Analysis:

  • fundamental analysis starts with a financial statement .
  • fundamental analysts take a long relatively long term approach to analyzing the the forex market.

What is a financial statement? In the context of Forex fundamental analysis, financial statements (broadly speaking) are such fundamental data like:

  • interest rates,
  • employment/unemployment rates,
  • Gross Domestic Product,
  • Trade Balance etc

There’s more to fundamental analysis than those factors listed above. Other factors can include government and political/geopolitical factors which are or can be really hard to quantify by data.

When a fundamental analysts get busy analyzing fundamental data, what he is really doing is to determine if a country’s economy is getting weaker (less demand for their currency) or getting stronger (more demand for their currency).

  • if a fundamental trader who wants to trade the Australia dollar, he would look the main factors that drive the Australian Economy.
  • lets say that Australia’s unemployment rate last month was 5% and then this month its at 4% then what do you think is happening?

What do you think? Is the country’s economy in good shape or not?

Well the fact that the unemployment rate has decreased from 5% to 4%, that is a good indication that:

  • a lot more people have entered the workforce,
  • which means more businesses are active and are hiring employees
  • which means more money in the pocket of the workers,
  • which means they spend more on goods and services keeping business alive in the country,
  • which means the governments gets more taxes from individuals as well as businesses.

So its good for the country? Yes.

So what tends to happen is the the Australian Dollar has the chance to be stronger than any currency pair that it pairs up with, like AUDUSD.

This is a very basic explanation of how fundamental analysts look at the underlying fundamental data to predict or forecast the movement of price in the future and then trade based on that information.

But you see, here’s the thing: fundamental analysts will eventually have to get back to the use of charts to time their trade entries.

On the other hand, technical analysts believe that all that fundamental data is already factored into price by the market forces of supply and demand therefore why attempt to decipher the multitude of data that a fundamentalist will look at?

6. What Tools Do Technical Analysts Use?

Technical analysts use many tools and techniques. The main one is the chart. A chart represents price behavior over time.

There are 3 main types of charts used and they are:

I will take you briefly through each one of these 3 charts so you have a basic understand of the difference of each chart.

Candlestick Charts Are The Most Used By Retail Forex Traders

The building block of a candlestick chart is a single candlestick:

When you have a group of candlesticks forming over a certain period of time then this forms a candlestick chart:

A candlestick chart simply looks like a candle, that’s why its called by that name…candlestick chart.

The information revealed in a candlestick chart are:

  1. the open price
  2. the high price
  3. the low price
  4. and the closing price

Additionally, the length of the “body” of the candlestick gives you an idea of how far away the the price has moved from the opening price before it closed and this tells you a lot of things like:

  1. how strong the price move was during that period if the closing price is far away from the opening price.
  2. how weak the price move was if the closing price is closer to the opening price.

There a lot more to candlesticks than just those two mentioned above. If I have to to write about candlesticks, I won’t be able to write about what I’m writing here…which is technical analysis. Instead of working with individual candlesticks, I will generally be more interested in the patterns that they make.

In short, a candlestick chart is more appealing to many traders and it is the most popular charting and tool used the by traders.

Bar Chart

The building block of a bar chart is a single bar:

When you have lots of bars form across a certain time period then you have a bar chart:

A bar chart simplly looks like a bar, that’s why its called a “bar chart”.

The information shown in a bar chart is exactly the same as a candlestick chart:

  • open price
  • closing price
  • high price
  • low price

The only thing here is that the bar chart does not have a body…its just like a stick. Bar chart is the 2nd most popular chart used in trading by technical analysts. I will use bar charts on higher time frames but for trading decisions, I can get the information I need faster through candlesticks.

Line Chart

A line chart is a really simple chart that is just made of one line connecting either the open, high, low or close of prices. It is most often a line connecting the close of prices:

If you have a line connecting a serious of open, high or low or close of price over time, this gives you a line chart:

In reality, a line chart is would be rarely used in trading as it does not give you a much more fuller detail like the candlestick or the bar chart.

Comparing Candlestick Chart vs Bar Chart Vs Line Chart Side By Side

Let’s look at them side by side and see the difference, shall we?

The following chart is the same price chart information of EURUSD as represented by candlestick chart vs bar chart vs line chart:

Charts Summary

  • candlestick charts are very popular, used by many traders
  • bar char are also popular and used by traders
  • line charts, rarely used for trading.
  • technical analysts use candlestick charts and bar charts for their analysis (rarely line charts)

7. What Chart Patterns Do Technical Analysts Look For?

There are many chart patterns but you really don’t need a lot of them to make money in Forex. You could just learn a few and be good at it. What is the point of knowing everything but being a master of none?

Knowing the different chart types is good but not good enough. You need to know what to look for in a chart, especially in a bar and candlestick chart.

So what are chart patterns? They are specific repeated price patterns that are formed as a result of price action on the charts.

These chart patterns give traders an indication of the likely direction of where price is going to go next. How do they know? Because of observing and studying what happened in the past when these chart patterns were formed.

So what kind of chart patterns do you have to look for?

In my price action trading course, there’s an entire chapter 10 dedicated to 9 profitable chart patterns , I suggest you head there and read it after going through this.

You will learn about such chart patterns like:

If you are a trader wanting to learn more about technical analysis head to that link on chart patterns. To be open, I don’t concern myself with the many different patterns. For me, price is either trending or it’s not and I don’t need to know all the different triangle patterns because to me, they show the same market condition: consolidation.

8. What Candlestick Patterns Do Technical Analysts Look For?

Technicians also look for specific candlestick patterns to give then an indication of the likely direction price is going to move.

So what’s the difference between chart patterns and candlestick patterns?

Well, chart patterns usually involved a lot more candlesticks compared a candlestick and these can be spaced sporadically over time and it needs a keen eye to actually pick out the charts patterns that are forming.

With candlestick patterns, at the most, it involves 1-2 candlesticks that form next to each other.

The best resource for you to learn more about candlestick patterns are these links below:

  • top 10 reversal candlestick patterns
  • if you want more details of each of the top 10 reversal candlesticks including how and why and why causes them to form, then click here .

9. What Technical Analysis Indicators Are Used In Technical Analysis?

There are now hundreds of indicators that any Forex trader can use today. But there are only a few that are much more frequently used that the rest.

A quick look in the MT4 trading platform reveals this:

Most of these forex indicators are derived from price and to a lesser extent, volume.

Here are 4 Popular Technical Analysis Indicators For Trend Identification:

  • moving average (for example, if moving average is pointing up and price is travelling above the moving average line then the trend is up, the opposite for downtrend)
  • bollinger bands
  • parabolic SAR.
  • average directional movement index

Here are 5 examples of Popular Oscillator Indicators used by technical analysts:

  • average true range
  • commodity channel index
  • MACD
  • Relative Strength Index
  • Stochastic Oscillator

All these indicator are tools used by technical analysts to assist them in making trading decisions.

As a free gift, you can download this free indicator blueprint that can give you a different look at using indicators as a form of technical analysis.

10. Who Is The “Father” Of Technical Analysis?

Charles Dow. Charles Dow was the person credited with being the father of technical analysis although that is probably up for debate.

11. What Are The 3 Main Technical Analysis Theories Put Forward By Charles Dow Which Are Still Valid Today?

  1. price discounts everything
  2. price movements are not totally random
  3. What is more important then “Why?”

12. What Is The Price Discounts Everything Theory?

I quote Stockcharts on this answer:

Technical analysts believe that the current price fully reflects all information.

Because all information is already reflected in the price, it represents the fair value, and should form the basis for analysis.

After all, the market price reflects the sum knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others.

It would be folly to disagree with the price set by such an impressive array of people with impeccable credentials.

Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.

13. What Is The Price Movements Are Not Totally Random Theory?

I again quote stockcharts on this answer:

Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis. In his book, Schwager on Futures: Technical Analysis , Jack Schwager states:

“One way of viewing it is that markets may witness extended periods of random fluctuation, interspersed with shorter periods of nonrandom behavior. The goal of the chartist is to identify those periods (i.e. major trends).”

14. What Is The “What Is More Important Than The Why Theory?

It means that technical analysts are only only interested in 2 things:

Price is the end result of the underlying forces of supply and demand in a currency pair. Therefore by focusing on one thing only…PRICE, technical analysis presents a direct approach.

This argument does not sit well with fundamentalists because they are concerned with the ‘WHY’ price is what it is.

For a technical analyst, trying to ask and then answer the “why” question brings a lot of possible answers and some of those answers cannot be quantified and also on the same token, they can be too broad.

So for a technical analysts perspective, it is best to concentrate on what and never mind the why and if the price goes up, the technical analysts knows that the answer is really one thing: more buyer (demand) than sellers (supply).

Keep in mind that the main driver behind Forex is interest rates and the outlook of a country’s economics. Supply and demand as it is generally understood, it can be argued, take a backseat.

15. You Don’t Need A University Degree To Do Technical Analysis

A chart is a chart! You don’t need a business or economics degree to know how to analyze a EURUSD chart or a GBPUSD chart or a AUDUSD chart. But if you want to be a fundamental analyst, getting a university degree in business economics can helps because there’s a lot in fundamental analysis.

The good thing about technical analysis that you in one financial market, example forex, can be applied to all the markets-they are universal.

Things like support and resistance levels, trading range, trend, price chart patterns, candlestick patterns can be used on any chart. The time frame they are applied to does not matter, it can be one minute up to on month.

16. Do You Need To Know Everything In Technical Analysis To Become A Profitable Trader?

No. Being a very good technical analyst is no guarantee that you’d be a profitable trader, far from it. The application of technical analysis knowledge with sound forex money management leads to success.

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Believe this or not, you could focus on pullbacks that have been borne out of momentum, as your only trading setup.

17. Main Things Technical Analysts Look For In A Chart When Analyzing Price?

Trends

  • When price is heading up, that is called an uptrend.
  • when price is heading down, that is called a downtrend.
  • the use of trend trading strategies like moving average crossovers like floor traders method or trendline trading system allows traders to ride trends to make profits in trending markets.

Support levels

  • A price level where price heads down and bounces up from significantly is a support level.
  • spotting them on a chart is very easy, looke for “valleys” or bottoms
  • support levels provide traders good buying opportunities
  • the use of bullish reversal candlesticks for trade entries enhances your trading strategy in this situation.
  • trading strategies like this can be really handy.

Resistance Level

  • resistance levels are opposites of support levels and by definition, resistance levels are price levels where price goes up, hits it and moves back down.
  • spotting them on charts is really easy….look for a ‘mountain tops” or a peaks
  • resistance levels provide very good selling opportunities
  • the use of bearish reversal candlesticks to sell greatly enhances your trade entries.

Trading ranges or price channels

  • price ranges can also be called channels and looks like a ball bouncing in a narrow tunnel until eventually price will breakout of of this narrow range either up or down.
  • price channels are in fact support and resistance levels at work, so price bounces between the support and resistance levels.
  • price channels can be horizontal like shown on the graph below, or they can be diagonal price channels .

18. What Is The Core Of Technical Analysis?

Price! The objective of a technical analysis is to predict future price movements. Price is a leading indicator. Why? Because price often precedes fundamental developments and therefore it really makes sense to look directly at price movements.

19:What Is The Best Resource For Learning More About Technical Analysis?

I’m going to be bias on this one BIG TIME …its my price action trading course, apart from being absolutely free and you don’t have to pay anything, my course covers topics such as:

Enjoyed this post about technical analysis ? Why not share it with your friends by clicking those sharing buttons below, the’ll definitely love you for pointing this forex site to them! Take care!

Complete Guide on Article Analysis (with 1 Analysis Example)

In this dynamic guide, we will help you to understand what is a critical analysis writing and how to write a good critical analysis paper that fits news articles and research journals.

Here is a flow of our guide:

What is a Critical Analysis Writing?

Critical analysis writing means evaluation of author’s work where it can be a news article analysis, a research journal article, a book, transcript of a conference or even a movie.

In most cases, it has an aim to increase reader’s understanding of an article’s thesis and the contents. A critical analysis article writing is subjective because it expresses writer’s opinion, analysis or evaluation of a given text. In order to understand that you are working with a critical analysis, you have to remember that analysis means breaking down and studying of the parts. As already mentioned, there can be many types of articles to analyze. You have to understand what type of an article you are going to work with, so you can come up with a right tone and format of your future essay.

Remember that when you analyze your paper, your main task is to make sure that your audience understands the major points without much difficulty. You have to show your critical thinking skills and make judgments about the subject as you analyze an article, so you can come up with clear opinion and conclusions.

How to Analyze an Article

When you read an article or a news report, find and identify author’s main points and the thesis. Analyze the structure of the article step-by-step as you read. Always give yourself enough time to read through the article. If writing is “ a must” for you as you read, you can start with an outline draft first where you mention the most important points. In most cases, look for a purpose of author’s written work. There can be several purposes of writing:

  • Inform the reader: look if the article has a clear structure and whether it provides sufficient evidence supported by facts and additional research.
  • Persuade the reader: look to find if the author has presented logical reasoning and counter-arguments, opposite opinions to persuade someone about particular opinion.
  • Entertain the reader: see what emotions are caused by the article and how does it personally influence and inspire you.

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How to Write a Critical Analysis?

Start with reading an article in question to help yourself understand author’s opinion and a purpose. Next, start working with an outline that will guide you through the main ideas as you prepare to write a critical analysis. Make sure to:

  • Try to avoid speaking of your ideas by starting with “ I think”, “ I believe” and “ In my opinion” as the subject of your critical analysis is a subject, not your personality.
  • Always make sure to introduce the subject in your paper, as the audience may not be aware of what you are writing of.
  • Focus on both strengths and weaknesses of the author by trying to follow the same structure used.
  • Always use evidence and the facts to support your claims and presented ideas.
  • Use critical analysis writing to tell of article’s value and relevance.
  • Always remain open-minded and unbiased as you analyze, read, and write your paper.

How to Analyze a News Article

Since the news article has a purpose to inform the audience, it is important to understand that the news reports are time-sensitive and usually relate to particular events and incidents. When working with the news article critical analysis, look out for the following:

  • Check the headline of the news article and include it in your thesis
  • Focus on structure, voice of the article, tone, and rhetoric
  • Examine the structure of the news report to see how much of a personal opinion is included
  • Look for metaphors, alliterations, and allegories to understand author’s true opinion.
  • Determine the tone of the article by trying to identify the news report with one word. It can be critical, angry, passionate, satirical or even neutral.

How to Analyze Research Articles

When you have to analyze research articles, you should make sure that you:

  • Describe the article briefly and explain it to the reader what the article is about. While you are reading the article, you have to look for details that identify the topic of the article.
  • Identify the purpose of the author or a reason why the author believes that a topic of research is relevant and important.
  • Identify the research methods and try to identify whether they appear to be suitable or not.
  • Check and provide evidence and facts as you speak of a research article and back it up with your own examples.
  • Check (and state, if applicable) whether the author refers to other research articles and if similar studies have been done. If yes, it should be mentioned and explained in your work as you speak of research methods and evidence.
  • Analyze the sources that were used by the author to get a better idea of how the author has formed his or her thoughts. It will help you to analyze research articles with greater professional competence and a higher level of confidence.

Article Analysis Template: Follow for a Better Writing

To make it easier for you to write a critical analysis essay, we have a helpful analysis writing template that will guide you through the most critical points. This helpful writing template will make sure that you are following the right format, structure, and do not miss anything important!

Introduction

  1. State the title of the work that you analyze, specify author’s name and the date of publication, if available.
  2. Outline the main ideas of a news report or a research journal article to identify the author’s thesis.
  3. Come up with your own thesis statement and talk briefly of your main vision and ideas related to original paper.
  4. Keep it short! After all, it is an introduction!

Examples to Follow:
The “Things They Carried” by Tim O’Brien is an educational and a self-critical story because the author makes a point about…
The article “Racial Prejudice in Pretoria, South Africa” by Joost Van Der Graaf provides an unbiased insight on racial relationships in South Africa in a unique manner because the author has studied…

Summary

  1. Provide a brief outline of the main ideas presented in your research article, news report, book or a movie.
  2. This is an actual part that should answer to the questions what, why, who, when and how exactly.
  3. Discuss the structure of an article that you are working with, talk about the style and the point of view presented by the author.

Examples to Follow:
This article tells about… An academic environment where the research has taken place is… The main subject in the news report is telling a story of his own vision of a financial crisis… The theme of a research article focuses on… The author clearly argues that… The research makes an important point of a difference between home-schooling and public education through the lens of … The authors conclude that…

Analysis

  1. State what you like and what you do not like about the article or a news report in a critical way.
  2. Explain your own ideas by offering specific examples from an actual article, a news report or a book.
  3. Next, you have to state and explain whether the author has achieved his or her intentions and goals or not.

You have to use analysis to see whether an original journal article or a paper is focused, clear, unbiased, informative, and persuasive enough. Another important point to check is whether an article directs to appropriate and specific audience and if it really meets intentions and a purpose. Check for correct conclusions and summing up of a research being done.

Conclusion

a) Restate your thesis in a different way, using new words.
b) Summarize your main thesis and ideas presented, using core points in a different tone.
c) If necessary and if appropriate, you should make a call to action for your target audience.

Examples to follow:

This article is important because it provides a unique… This article has a biased attitude because the author only focuses on… Instead of turning to real-life examples and the actual statistics, the author of the news report only makes assumptions…

Now let us move on to an actual critical analysis writing example of a research article, so you can learn and start with your own work!

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Example of an Article Critical Analysis

We want to offer you a real-life critical analysis example of a research article. Therefore, we did an actual work for you, based on an important topic of virtue ethics approach and morals in the field of healthcare.

An original article can be accessed here.

“A Virtue Ethics Approach to Moral Dilemmas in Medicine” Critical Analysis

“A Virtue Ethics Approach to Moral Dilemmas in Medicine” article by Patricia Gardiner, published in 2003 in Journal of Medical Ethics, is an example of innovative study of the role and place of morals and the virtue ethics in medicine and nursing practices. While majority of complex moral dilemmas are analyzed through the lens of consequences and the facts, the author takes a different approach where the virtue ethics play a key role in analysis and strategic thinking. In other words, the author tries to make it clear to the audience that once the principles of a person or an organization enter a conflict stage, there is always bias that forces an individual to choose the factors that should or should not dominate. Considering emotional and moral elements of an equation, Gardiner turns to virtue ethics as to a framework that focuses on the character of a moral agent itself instead of being limited by studying the rightfulness of an action alone.

Turning to analysis of two different moral dilemmas, the author walks an extra mile to illustrate the ways how different scenarios can be enhanced by the virtue ethics in such complex environments as healthcare. While the subject may appear to be philosophical to general audience, Gardiner approaches moral dilemmas as a general practitioner, which makes her opinion less biased from practical perspective. Still, turning to philosophy, the research article studies the place of a reason and analyzes the role of emotion on a daily basis. It allows the audience to see diverse circumstances and apply their emotions in practice. An important role is given to motivation because a virtuous person approaches a situation where internal attitudes, professional skills, and a reasoning should come in balance. The cases presented by the author, while familiar to most of us, speak of moral dilemmas in healthcare from a different point. Even though Jehovah’s Witness case has legislation’s element, the author speaks of a moral side and the virtue ethics. The same relates to the case of a doctor where professional judgment collides with anxiety, stress, and personal experiences. What kind of a moral choice should be made? The article helps a reader to understand decency and professionalism from a moral point that replaces consequentialism and deontology.

It is important to understand that Gardiner does not try to persuade a reader that virtue ethics is a superior solution or an only way to deal with moral dilemmas. One of the differences with the virtue ethics is that it recognizes emotional constituent as an integral and an important element of moral perceptions. It considers the role of motivation as important to provide a space for unbiased human interactions. Finally, it provides additional flexibility and allows a person to look for creative solutions in moral and ethically-complex situations where not all the parties involved can be satisfied. The article makes an important call for every professional in the field of healthcare to look beyond usual solutions used on a daily basis and implement such virtuous personal and professional characteristics as honesty, courage, empathy, integrity, and an ability to follow one’s obligations and responsibilities in a natural way.

At the end of the day, Linda resolves her Chicago citation problems — being mentored by a Professional Nerd. Let Nerdify find your perfect match using AI! ��

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