Chapter 5Technical Analysis

Technical analysis is a very effective means of examining past price moves and volume to help predict future moves in a particular market. Its roots can be traced back to the seventeenth century in the Netherlands with Confusion of Confusions by Joseph de la Vega, and even before that to Japan with the rice trader who developed what we now know as candlestick charts.

Even for the nonbelievers who follow only fundamentals, having a basic understanding of technical analysis can prove useful in many macro markets. Technical analysis gives many traders the discipline to know when to enter a trade and how to look for appropriate risk/reward ratios on their trades. Since much of technical analysis uses charts to measure ...

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