So what is technical analysis? Simply it is the study of market data that provides traders insights into probable price moves. However, it is not a Holy Grail to vast riches. Still, it is an invaluable tool in the process of making trading decisions. Technical analysis explained is a web site dedicated to help you who want to learn the discipline. It attempts to provide an easier path in what you should look at. More importantly, what not to look at in developing your trading goals. It is designed to provide various examples of market price action that quantifies the concepts.
Technical Analysis Explained
To learn technical analysis you really need to study some of its history. The earliest information begins in eighteenth century Japan and was reportedly used to trade the rice market in Osaka. Munehisa Homma evidently was the first to format price data into a graphic representation. Many will recognize the phrase Japanese Candle Stick Chart. That was his concept. In a sense it was a more advanced representation of price action than the standard bar chart that we use more commonly today.
There has been much information about market price behavior published since then. That includes W.D. Gann, Edwards & Magee, Wells Wilder, and Perry Kaufman (to name a few). However the most influential is probably the book by John Murphy; “Technical Analysis – of the Futures Markets”. This thick book should probably be the go to reference on developing your technical trading plan.
Technial Analysis Explained
For you to define technical analysis, it is incredibly important that you understand that the chart or indicator is not the market. It is a representation of the market in a graphical format. All the trend lines, oscillators, moving averages etc. are analytical representations of what we call the market. But markets themselves seem to take on a living, breathing almost human life of their own. Human behavior can’t be accurately predicted by mathematical formulas. However, probabilities can predict likely outcomes.
In that same vein we can use technical analysis to manage risk. However, we can’t use it to determine exactly what the market will do. It is the propose of the Technical Analysis Explained website to teach that concept.