Chapter 1

Opening the Technical Analysis Toolbox

In This Chapter

arrow Defining technical analysis

arrow The straight scoop on buy-and-hold

arrow Defining trendedness

arrow Starting your technical analysis journey

Technical analysis is the study of the price behavior of securities (and often the accompanying volume, too) in order to predict upcoming price moves. Focusing on price behavior gives you a window into the mind of the market — what the key players are thinking — and helps you make better trading decisions. Technical analysis seeks to identify and measure market sentiment, which at the most basic level means optimistic, pessimistic, or uncertain about future prices.

In this chapter, I take you on a quick tour of key technical concepts and review why technical analysis works. Even when your indicators let you down — and they will — when you adopt the technical analysis mindset, you start to manage the whole trade, from entry to exit. After all, your goal is to make money trading securities, and that entails knowing when to sell as well as when to buy; in other words, managing market risk. But technical ...

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