Chart analysis has become more popular than ever. One of the reasons for that is the availability of highly sophisticated, yet inexpensive, charting software. The average trader today has greater computer power than major institutions had just a couple of decades ago. Another reason for the popularity of charting is the Internet. Easy access to Internet charting has produced a great democratization of technical information. Anyone can log onto the Internet today and see a dazzling array of visual market information. Much of that information is free or available at very low cost.
Another revolutionary development for traders is the avail-ability of live market data.With the increased speed of market trends in recent years, and the popularity of short-term trading methods, easy access to live market data has become an indis-pensable weapon in the hands of technically oriented traders. Day-traders live and die with that minute-to-minute price data. And, it goes without saying, that the ability to spot and profit from those short-term market swings is one of the strong points of chart analysis.
Sector rotation has been especially important in recent years. More than ever, it’s important to be in the right sectors at the right time. During the second half of 1999, technology was the place to be and that was reflected in enormous gains in the Nasdaq market. Biotech and high-tech stocks were the clear market leaders. If you were in those groups,you did great.If you were anywhere else, you probably lost money.
Charts can be used by themselves or in conjunction with fundamental analysis. Charts can be used to time entry and exit points by themselves or in the implementation of fundamental strategies. Charts can also be used as an alerting device to warn the trader that something may be changing in a market’s under-lying fundamentals.Whichever way you choose to employ them, charts can be an extremely valuable tool — if you know how to use them.This booklet is a good place to start learning how.
- WHY IS CHART ANALYSIS SO IMPORTANT?
- WHAT IS CHART ANALYSIS?
- HOW TO PLOT THE DAILY BAR CHART
- SUPPORT AND RESISTANCE TRENDLINES AND CHANNELS
- REVERSAL AND CONTINUATION PRICE PATTERNS
- PRICE GAPS
- THE KEY REVERSAL DAY
- PERCENTAGE RETRACEMENTS
- THE INTERPRETATION OF VOLUME
- USING DIFFERENT TIME FRAMES FOR SHORT- AND LONG-TERM VIEWS
- USING A TOP-DOWN MARKET APPROACH
- MOVING AVERAGES
- RATIOS AND RELATIVE STRENGTH
- THE PRINCIPLE OF CONFIRMATION