Technical Analysis
Technical analysis studies the supply and demand in a market in the attempt to determine the future direction or trend. Technical analysts use charts and other tools to identify patterns that may suggest future activity.
Technical Analysis Know-How
How to Test and Interpret Trading System Performance
Pick up any technical analysis trade magazine, and inevitably you will run across companies and practitioners marketing technical analysis trading systems. Like any other type of investment strategy or methodology, a popular way to determine how one system stacks up against another is by comparing annual returns. While these numbers are helpful in separating the winners from the losers, it is important to keep in mind that a multitude of factors impacts the performance of any trading system.
When judging the efficacy of a system’s reported performance or the performance of a system you create, keep in mind several issues:
- Are the performance figures based on backtesting or actual trading?
- Is the system optimized and, if so, how does it perform over “hold-out” periods?
- How does it handle income reinvestment?
- Are there any tax implications?
- What are the assumptions inherent to the system itself—commissions, slippage, and money and risk management stops?
This article will walk you through a general discussion of how these elements can impact the financial performance of...
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Monitoring the Smart Money by Using On-Balance Volume
The study of technical analysis focuses primarily on price and volume. Perhaps it is not surprising that price garners most of the attention. However, volume deserves more than a cursory glance.
Volume is important because it provides information about the strength (or lack thereof) of price movements.
Heavier volume should be in the direction of the existing trend—volume should be relatively higher on “up” days during an uptrend and on “down” days during a downtrend. Furthermore, price movements on heavier-than-normal volume are more apt to continue than...
Technical Analysis Articles
- Illuminating Trends: An Intro to Japanese Candlestick Charting
- Analyzing Volume & Price Ranges Using Equivolume Charting
- Arms' Ease of Movement: Adding Volume to the Equation
- Predicting Short-Term Trends: The Cup-With-Handle Pattern
- Monitoring the Smart Money by Using On-Balance Volume
- How to Test and Interpret Trading System Performance
- Point & Figure Charts Revisited
- ID'ing When to Buy and Sell Using the Stochastic Oscillator
- Analyzing Supply and Demand Using Point and Figure Charts
