What is Technical analysis?

Essentially technical analysis is the study of past price and volume data to try and predict the future movement of price. The thing is technical analysis can get very complicated very quickly. There are a massive array of technical indicators and oscillators that people have created over the years. It’s truly amazing how many different things can be created from what is essentially 5 pieces of information, open, close, high, low & volume.

 

The open is the price which the instrument opens the trading time frame.
The close is the price which the instrument closes the trading time frame.
The High is the highest price made during the trading time frame.
The low is the lowest price made during the trading time frame.
The volume is the number of contracts that have been traded during the trading time frame.

 

Each indicator and oscillator has its fans. Some people will tell you that when a certain indicator or oscillator does a certain thing it’s a clear buy or sell signal. Others prefer to use combinations of different indicators or oscillators. The important thing to remember is that they are all created from the same information, the price(open, close, high, low).

 

The price is arguably the most important piece of information about any instrument you are looking to trade. So much so that some people don’t even use any indicators to make their trading decisions they simply look at the price on the chart and make their trading decisions accordingly.

 

There are a vast amount of indicators and oscillators, too many to mention them all here. Over the next few pages I will go through some of the most commonly used and explain in detail their construction and there use in trading.