Technical Analysis Defined
August 10, 2012 at 1:41 AM (QQQ)(DIA)(SPY)(GLD)(FB)
Technical Analysis Of Emini Futures
Technical analysis is perhaps the oldest device designed to beat the market. It has a secular history whose origins can be traced to the seminal articles published by Charles H. Dow in the Wall Street Journal between 1900 and 1902.
The principles of technical analysis are derived from hundreds of years of financial markets data. Some aspects of technical analysis began to appear in Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during the early 18th century which evolved into the use of candlestick techniques which have only recently made their way into the western world and Wall Street.
There are those who dispute Technical Analysis. One such highly respected individual is Burt Malkiel, noted author and professor at Princeton who believes the behavior of financial markets are more akin to a drunken sailor's stumble back to the ship. His work is highlighted in a very popular book now in its 11th printing -
A Random Walk Down Wall Street.
Fundamental Analysts examine earnings, dividends, new products, and research, while Technical Analysts employ very different techniques. Using charts, technical analysts seek to identify price patterns, market trends and attempt to exploit those patterns.
The overlay of the price chart is what most technical analysts are drawn to with well-known reversal patterns such as head and shoulders or double top/bottom, moving averages, and other obvious indications such as lines of support, resistance, price channels, and formations of flags, pennants, balance days, cup and handle patterns just to name a few.
Technical analysts also widely use market indicators most of which are mathematical transformations of price including up and down volume, advance/decline data and a multitude of other data. These indicators are used to assess whether an Emini Futures Contract is trending, and if it is, the probability of its direction or continuation.
Technicians also look for relationships between price/volume indices and other market indicators.
Additional examples include the Relative Strength Index, and MACD just to name a few. Other avenues of study include sentiment indicators such as Put/Call ratios, Bull/Bear ratios, Short Interest and Implied Volatility.
Technical Analysis - Fact Or Fiction?
Those who use technical analysis tend to be very passionate about it. So passionate, they are often driven to devote years of study which then leads to a search for the ultimate predictive tool. Those who dismiss technical analysis as witchcraft or junk science are quite often just as passionate in their own belief system.
While we ourselves are staunch believers in the use of technical analysis, we are quick to caution that it is very easy for a trader to step through the looking glass into a world of pseudo-reality where the act of actual trading quickly takes a back seat to the search for a Holy Grail.
We have created a simple set of what we believe to be highly accurate technical indicators that assess current market conditions and offer high probability set-ups across multiple markets, in multiple time frames under varying market conditions. We invite you to join us and test our indicator set for 1 Week with no obligation. Together, we will trade live markets and explain the use of each tool. Apply!
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