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• Technical analysis


  An approach in predicting the possible future price movement of a Security based on Market data
• Market data


  The price as well as the volume
• Why people focus on technical analysis

  • It records the actual history of trading
  • The price movement could create a pattern that can assist prediction of future price movement
• Users of technical analysis

  • Technical analysts
  • Fundamentalists
• Technical analysts/chartists


  Believe that current or past price action or movement in the market is the most reliable information of future price action
• Fundamentalists


  Use fundamental analysis to identify viable investments, then use technical analysis to decide entry and exit points
• There is a link between psychology and prices, and human nature/psychology is constant, so the principles of technical analysis can be applied to any time frame
• Types of trends


  • Primary trend (9 months to 2 years)
  • Intermediate trend (6 weeks to 9 months)
  • Short-term trend (3 weeks to 6 weeks)
• In one primary trend, there can be many intermediate trends, and in one intermediate trend, there can be many short-term trends
• Trend cycle


  • One complete cycle of primary trend, with upward and downward primary trends, containing multiple intermediate and short-term trends
• Long-term investors

  Concerned with the direction of the primary trend (bull or bear)
• Short-term traders


  Concerned with smaller price movements and short-term trends, but also need to be aware of the direction of the primary trend
• Other types of trends

  • Intraday trend (extremely short-term, influenced by psychology and instant reactions)
  • Circular trend (extremely long, lasting up to 25 years, containing multiple primary trends)
• Peak


  The high point in the price movement
• Trough


  The low point in the price movement
• Determining trend using peak and trough progression


  1. Observe a series of higher peaks and higher troughs to identify an upward trend

  2. Observe a series of lower peaks and lower troughs to identify a downward trend

  3. Look for a peak that fails to exceed the previous peak, signaling a potential reversal

  4. Confirm reversal by observing price breaking below the previous trough, with supporting volume information