Even investors that claim to strictly rely on fundamental analysis, similar to evaluating accounting results in a company, will glance at technical analysis reports before making a final decision. Using chart data and mathematical indicators of price, volume, relative strength and similar parameters allows technical analysts to predict price trends.
Here are five ways to use technical analysis for finding profitable investments in almost any financial market:
Learning TA on your own can be a challenging process. Instead, review popular financial sites for articles with TA and choose the writers that are correct with their trend predictions more often than not. You will learn their analysis methods, while being able to follow their investment picks. Ideally you want analysts that cover the sector in the financial markets you are interested in.
Following experienced TA writers is the fastest way to apply technical analysis your own investment portfolio.
As you search for TA writers to follow, you will notice that some of them have made completely wrong calls at important times for the financial markets. A great example of a mistake like this is Harry Dent missing the entire commodities bull market. When you find a technical analyst that has several accurate long-term calls, follow that analyst. One of the top technical analysts of all time, James Dines, has correctly called virtually every bull market during his lifetime
As you start learning about reading charts and other technical parameters, it is easy to get overwhelmed with the number of indicators available to you. Fortunately, the basic indicators including price movements, relative strength, volume movements, up versus down days, 200 moving day average versus 50 movie day average and similar basic indicators are the critical ones to follow. Ignore the more esoteric indicators unless you have specific knowledge about their effectiveness for particular markets.
When you fully grasp how to use basic indicators, and you wish to trade market moves that occur in days and weeks instead of months and years, you might consider advanced indicators. Advanced indicators include candlestick patterns, midday reversal trends, internal support marks, derivative indicators, and similar complicated parameters. These types of indicators are better suited for micro moves in the market, including for FOREX.
Of all the indicators for determining major trends, volume is one of the most reliable. With only rare exceptions, investments rise on increasing volume and fall on decreasing volume. If an investor only watches volume indicators, then the majority of the time the investor will be on the correct side of trades in almost any financial market.