Technical analysis

Technical analysis helps you to determine the short term trend of a shareprice. In a trend, the direction is important. But equally important is to recognize the tipping points. Technical analysis will help you with that.

Technical analysis is not the only method of stock analysis. Besides technical analysis, event analysis is an important method to recognize trends and tipping points. TEchnical analysis use information about the share, such as the price and volume. When using event analysis, company related events are used to predict the short term trend of the shareprice.

Besides the short term trend, it is important to look at the longer term horizon. With fundamental analysis, the companyrelated indicators are used to determine the value of a share. These indicators are for example profit or cash flow.

Average true range (ATR)

In an earlier article about the ADX indicator, I promised to post an article about the Average True Range (ATR). I will discuss the ATR indicator in the article you are reading right now. I will write about the signals the ATR sends and the calculation of the ATR. When using a technical analysis method, I personally always want to know how to interpret the signals and how to avoid misusing the technical analysis method. This will also be part of this article.

The Average Directional Index indicator (ADX)

To continue the article series about the objective technical analysis, I will discuss the Average directional index (or ADX) in this article. Earlier, I have written articles about the moving average, the moving average convergence/divergence indicator and the relative strength index, which all are objective technical analysis methods. Just like the other objective technical indicator, the average directional indicator is used to measure trends of a share.

Relative strength index: signals and usability

After the moving average and the moving average convergence/divergence, the RSI will be the third technical indicator on which I spend an article. The RSI, or Relative Strength Index, is one of the most used technical indicators. The RSI is, just like the moving average and MACD, an objective, mathematical technical analysis method.

Different types of technical analysis

I like to think that the risk of each range of investment products is the same, like I mentioned in an earlier article on technical stock analysis. Each share has the same (high) risk level and savings on bankaccounts have a low risk level. Allthough the risklevels are the same within ranges of investmentproducts, this does not mean that the risk of each share is the same at every point in time, based on the price-earnings ratio or dividend yield. Expensive shares do have a higher risklevel and a lower chance on a high return. Another method that is often being used to determine the risklevel and possible return is technical analysis.

MACD indicator, signals and limitations

I have written different articles about technical analysis. In an earlier post, I discussed the different types of technical analysis that are used and their pros and cons. Besides that, I have discussed the moving average in an article, the use of this technical analysis indicator and the different versions of the moving average. In this article, I will describe the MACD technical analysis method. The MACD is an indicator that uses the moving average.

Moving averages: use and methods

When using technical analysis, I prefer the most simple, objective methods. The reason for this is that these methods are the used the most and are objective, which give the best results. In an earlier article, I discussed the different types of technical analysis and I promised to describe different indicator driven technical analysis methods. In this article I will discuss the use and different variations on the moving average method. One of the goals that the moving average can be used for, is identifying trends.

Technical analysis

Technical analysis of shares means that quantitative data is used to predict the future price of a share. The main quantitative data is the chart of the historical price development. A trend in the chart is searched, after which the future prices is predicted. This is done by adding a top line (resistance) and a bottom line (support) to the chart. Both lines do not have to be horizontal lines, but can also be draw into the chart diagonally. Also the tops and bottoms for shorter and longer terms can be taken into account.