Introduction to Market Technical Analysis
Making Sense of Market Technical Analysis Tools
Let’s face it – stock market trading can be intimidating and complex for investors who don’t take up the challenge to understand the nuances and options available to them. There are certainly traders that simply rely on news articles that impact particular market segments and companies or others that react to tips from friends, relatives, or investment columnists.
Those who hold the most promise for financial success are those who dig deep enough to understand at least some basics of strategies and develop skills in evaluating market opportunities through analytical tools available. Software is available for sale that offers both simplicity and sophistication in navigating through selection and retention of financial vehicles whether you select stocks, bonds, commodities, currency, or futures. Your online broker can also provide tools for clients and even help with your use of the tools they offer.
What Technical Analysis Tools are Available?
Probably the first tool a stock investor will be exposed to and need to understand is the common stock “ticker” that everyone is used to seeing on web sites and of course the NYSE building itself. Standard stock tickers provide information such as:
- Stock symbol of the investment/company
- Price quote
- Net change in value
- Percent change in value
This stock ticker can be very useful for tracking individual investment status, as updates are continuous throughout the day.
Investors and day traders can detect trends in a particular stock through basic charts such as 52-week price history and 52-week volume history. To optimize use of these charts some tools allow selection of the time period, and drill-down into the actual values that make up the chart. With some level of sophistication these values can be imported into statistical software such as excel for closer analysis.
Trends can also be detected through the use of more technical analytical techniques that provide insight into “indicators”. Becoming familiar with indicators and their use to drive investment strategy enables timely investment decisions.
Volume indicators give traders insight into a stock’s trends over time against recent activity.
On-Balance Volume (OBV) – this is a reasonably simple method of indicating a security’s volume over a period of time relative to its price. The concept behind use of this indicator is that a change in volume will be followed by a corresponding change in price. So an increasing OBV provides an indicator that there will be a resulting increase in volume with increasing price. On the opposite side a declining OBV will indicate increased volume when prices are actually on a decline.
Accumulation/Distribution Line – Somewhat similar to OBV the accumulation/distribution line chart further takes into account the range of trades during the time period covered by the chart. This can provide a more accurate picture of the actual monetary flow of the security in the form of a trending line either above or below the midpoint of the range. The result is that an upward trend is an indicator of buying activity while a downward line indicates a sell trend.
Average Directional Index (ADX) – There are many “indexes” utilized by investors as indicators as well. The ADX graph indicates not specifically the trend, but the strength of the trend. This value will tell a prospective investor how meaningful the observed trend is. An ADX above 40 indicates strong trending, while an ADX below 20 is considered relatively insignificant or non-trending. Remember that the ADX value is only a value of trend strength whether the trend is up or down.
Moving Average Convergence Divergence (MACD) – This is a much more technically-complex indicator that provides the investor with both momentum and trending of a particular investment. This MACD comprises two exponential moving averages (EMA) from two varying time periods to measure momentum of the security. Conceptually this presents a comparison of short-term vs. long-term momentum to predict future direction. MACD is the difference between the two averages, which are typically 12-period and 26-period EMAs.
Relative Strength Index – The RSI is an indicator that a security that is in a condition of being overbought or oversold. Consisting of a value in the range of 0-100 where 0 indicates the highest oversold condition and 100 is the highest overbought indicator, the index will tell the investor whether the particular security has been experiencing a higher volume of buying or selling over the covered time period.
There are many more analytical tools available tools available to traders and investors. A great deal of information is readily available through online brokers and investment sites such as Investopedia and financial web sites.
Making the Most of Market Technical Analysis
One of the best advantages a day trader or investor can have is a thorough understanding of their investment targets. This is true before executing a buy order up until the time of selling. Analytical tools and charts can provide the edge a trader needs to buy and sell the right financial instruments at precisely the right time.
SureTrader is a leading online broker that provides clients with analytical tools and real-time stock tickers to provide the knowledge and insight that gives you an advantage over other online brokers. Our friendly and informed support staff furnishes reliable support to clients 24×7. SureTrader customers utilize sophisticated tools for detection of trends and up-to-the-minute information that enables quick decisions taking advantage of critical timing for buying and selling. Information available crosses both national and global markets.
SureTrader’s lightning-fast execution of trades enhances your ability to be successful. Both desktop and mobile applications ensure timely access to SureTrader services – smartphone access is provided for both iOS and Android platforms. SureTrader investors leverage our global services to execute trades quickly and efficiently even in after-hours trading.
Contact SureTrader right away to get started doing online trading with the best in online brokers.
Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.