/biz/ - Business & Finance

Basic technicals to learn. 50SMA 200SMA.

RSI MACD indicators. Parabolic SAR (support and resistance) These three all developed by

Advanced theory can include Elliott wave
http://en.wikipedia.org/wiki/Elliott_wave_principle

and fibonacci
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:fibonacci_retracemen

ADX
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:average_directional_

In my humble opinion, indicators developed by Welles Wilder are the best and most reliable. Being in the computer age of auto trading. I think these are what most systems are set up to use. Thus why they become so apparent in the charts, almost like a self fulfilling prophecy.

Technical trading gives you the ability when learned properly to identify the oversold and overbought areas, where you can then risk your capital. Keeping the stop losses just outside of these boundary just in case we are wrong, keeping losses at a minimum and letting profits run with things like a trailing stop loss.

one might ask, how do you identify oversold and overbought areas. You look for the divergence between price per share and indicator levels.

from chart school : Divergence: A situation that occurs when two lines on a chart move in opposite directions vertically. People often look for divergences by comparing a stock's direction to the direction of its RSI, its MACD or its Stochastic Oscillator. There are two kinds of divergences: positive and negative. A positive divergence occurs when the indicator moves higher while the stock is declining. A negative divergence occurs when the indicator moves lower while the stock is rising.

here are some simple examples. http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:relative_strength_index_rsi#positive-negative_re