Technical analysis

Security analysis that seeks to detect and interpret patterns in past security prices. The New York Times Financial Glossary

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   is a method of predicting the future direction of prices by studying charts of past market action. Technical analysts, or chartists, try to predict future prices on the basis of how prices move up and down, rather than why they have moved.
   They pay close attention to recurring patterns in charts of price action and look at trends, and at the speed of change and the momentum.
   The analysts use four basic types of charts - line, bar, candlestick, and point and figure - and a large number of technical theories and indicators including Elliott wave theory, RSI, moving average convergence/divergence and stochastics.
   1 A line chart is the simplest form of chart. It is a plain record of a price charted against time with the changes marked as dots and joined together by a line.
   TECHNICAL ANALYSIS
   Time
   2 A bar chart represents price information on a vertical bar. The top of the bar is the highest price and the bottom of the bar the lowest. A dash on the left-hand side of the bar denotes the opening price and a dash on the right-hand side the closing price.
   A candlestick chart captures the same price information as a bar chart: the open, high, low and close. A thick box (known as the body of the candle) joins the open and close values. Thin lines on either end of the body (known as shadows)
   join the high and low prices. If the opening value is higher than the closing value, the body of the candle is solid or coloured. Conversely, if the close is higher than the open then the body of the candle is clear, white or unshaded.
    A point and figure price chart captures pure price movements with no regard for time or volume. Rising prices are denoted by a column of Xs and falling prices by a column of Os. Subsequent columns are placed to the right of earlier columns.
   Chartists make particular use of trendlines, which connect areas of specific price action. Both uptrends and downtrends are defined as trends that can be drawn on a chart by joining a minimum of four points. Chartists also look for peaks and troughs and for patterns in price behaviour, such as head and shoulders, double top and triple bottom.
   They watch for speedlines, which measure the rate of change, and patterns in price lines which form flags or pennants. They also check for areas of resistance and support in price patterns, signs of corrections or breakouts, and for gaps when prices have jumped or fallen so quickly that there is a gap in the price points on a chart.
   Channels can be drawn on charts to provide clear guidance when prices have moved outside a trading range. Chartists also look for patterns in the number of rises and falls in a market, using retracements to provide evidence to support Dow theory and Gann, Fibonacci and Elliott wave analyses.
   Chartists rely heavily on relative strength indices, momentum, moving averages and on MACD or moving average convergence/divergence. The following definitions of technical analysis terms are defined and explained under their own entries.
   Accumulation/Distribution Analysis Line Chart
   Alexander's Filter Momentum
   Alpha Money Flow Index
   Bar Chart MACD Moving Average
   Beta Moving Average
   Bollinger Bands Moving Average Crossover
   Breakout On Balance Volume
   Broadening Oscillator
   Candlestick Chart Patterns
   CAPM Peaks/Troughs
   Channel Lines Point and Figure Chart
   Charting Price Channel
   Chart Points Quantitative Analysis
   Chartist Rectangle
   Continuation Relative Performance
   Convergence/Divergence. Relative Strength
   Correction Retracement
   Correlation Reversal
   Counter Clockwise Reversal Day
   Cylinder Relative Strength Index
   Double Top/Bottom Sharpe Ratio
   Downtrend Sortino Ratio
   Exponential Moving Average Speedline
   Failure Swing Stochastics
   Fibonacci Numbers Support
   Flags/Pennants Three Box Reversal
   Floor Top Reversal
   Gann Trendline
   Gap Triangles
   Geometric average Triple Top/Bottom
   Head and Shoulders Uptrend/Downtrend
   High Low Open Close, HLOC Wedges
   Kairi Williams Percent R

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technical analysis UK US noun [U] STOCK MARKET, FINANCE
a method used to calculate the future value of shares by studying the patterns of their past behaviour rather than the fundamentals (= profits of companies whose shares are traded, the real economy, etc.): »

Are these tools used by most traders or is it just a minority who go in for technical analysis?

technical analyst noun [C]
»

Technical analysts say we have not yet seen the top of the current market.


Financial and business terms. 2012.

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