Technical Analysis Training:

Five Simple Tools Used by the Pros

1. Simple Moving Average
2. Multiple Moving Average
3. Trend Lines
4. Support & Resistance
5. Chart Patterns

A simple moving average is one of the most useful basic tools for the technical analyst. The average can be constructed out of the close of x number of past price bars -- 10, 30, 60, etc. The advantage of amoving average is that it collects a certain amount of past history into one number, smoothing out some of the more extreme movements and thus giving the trader a steadier view of the underlying move. This smoothed view can help the trader avoid whiplash, help stay in trends longer, and more accurately identify the shift between trends and congestions. Ten to sixty period moving averages are the most common moving averages but some exceptionally sophisticated traders have built successful systems around shorter moving averages such as three periods. Simple moving averages can be constructed out of any repeating number, such as the high, the low, or the close of a bar.

When more than one moving average is used the tool increases its usefulness in several ways. If the base element of the second moving average is different from the first by price (for example if one moving average is based on the close of the bar and the second is based on the high of the bar) then a channel system or envelope system can be created, and the market can be monitored as to it's degree of oversold condition or overbought condition. If the averages differ by length (that is, by the number of bars that the averages is based on) then a simple trend/congestion trading system is instantly created.The trader would go long when the faster of the two moving averages crosses over the slower of the two averages, and goes short when the two averages cross in the opposite direction.

Trend lines are drawn between two or more points in the market and can identify rising or falling support and resistance levels. Trend lined can also be used in a more innovative manner to identify other market states, such as whether the market is in congestion or in a trend. Once that is identified then appropriate trading tools can be applied to make entry and exit decisions.

Support is a gathering of buyers or buy orders below price, and if price dips to that level, buying is anticipated to commence and the down move will stop and reverse to the upside.
Resistance levels are areas above price, and if price rises to that level selling will commence and the up move will stop and reverse to the downside. The study and prediction of accurate support and resistance levels is one of the most useful applications of advanced technical analysis training.

Technical Analysts study the patterns that emerge from price bar charts as the data accumulates. Because the collective human emotions of all traders reacts to price variations, these collective actions can be seen as the typicalpatterns repeat. The technical analyst looks for these recognizable patterns because he or she expects them to repeat in the future. The more common patterns are perhaps less reliable since more people anticipate them and can react to them. Also some patterns tend to be ambiguous and different analysts will sometimes not agree if a pattern is existing on a chart or not. However more sophisticatedpatterns can be validated by many years of observation and can be quite reliable trading tools.

So you've made up your mind to get your financial future under control . The stock and commodities market has been carefully studied and now you have some opinions that are well founded. You're up to speed on the latest economic indicators and the dollar's strength. You already know what you really want to do, and even the markets.

Of course, you've heard what some of the Wall Street wise say "Decide what to trade based on fundamentals but make your entrance and exit decisions based on technical analysis ."

No doubt you know you will need technical analysis training. If you're going to learn this , you must get a good course under your belt in the topic. How can you find a great technical analysis course?

Here are a few great tips for choosing a high quality course in technical analysis .

Look into the author's credentials

Look for someone who has been in the field for many years , and who won't allow the newest fad to sweep them away . Quite a few fads go through Wall Street but surprisingly few enduring ideas .

Find out if they are a trader or if they're an academic?

If the material you want to learn is basic, well established, and does not move much past what is available in the public domain , then reading after an academic is fine for your technical analysis training. However, if you want more advanced techniques , try to find an author that is a successful trader, since they'll probably focus on the strategies that are most useful .

Can the training be applied to any security ?

If you are spending the time to learn technical analysis chart patterns , then you want them to be applicable to commodities, futures, Forex trading, and stocks . It would not be the best use of your time to learn technical analysis online if it applied only to the Dow Jones .

Are the techniques simple and straight forward or overly complex ?

There are certain courses that require you have a background in heavy math, like calculus on a college level . Some off the best training can be understood by someone who is intelligent and has a quality high school education

How much does the course cost?

Everyone should think about the cost but beware of courses that are cheap or free . This is not to say they are without value , for a free course may contain a lot of useful basic information , especially if it's public domain information and it is available in books. But in trading and the financial markets especially , you will only get information according to what you pay and really useful information generated by successful traders most likely will not come for free . Take a close look and if you can try to speak with someone who took the course to find out if it's really a valuable technical analysis indicator, software, or course .

Keep your eyes open and do your homework , and you can find great technical analysis training!