Chapter 1

Wrapping Your Brain around Technical Analysis

In This Chapter

arrow Understanding the basic principles of technical analysis

arrow Recognizing how crowd extremes and market sentiment influence trading action

arrow Examining and choosing indicators that match your trading style

arrow Starting your journey as a technical trader

Technical analysis is a set of forecasting methods that focus on the price and volume of a security rather than the fundamentals (supply and demand for commodities, earnings per share for companies, and so on). In technical analysis, you observe how prices move without regard for what analysts are saying about the price (such as whether it's above or below “fair value”). You use past regularities in price movements to predict future regularities. This chapter gives you basic information about technical analysis. Consider it the foundation on which to understand and use the topics in the rest of Book X.

Realizing That the Trend Is Your Friend

Technical analysis is the study of how securities prices behave and how to exploit that information to make money while avoiding losses. ...

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