Ratio Analysis - DD1

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Technical Analysis: Introduction

The methods used to analyze securities and make investment decisionsfall into two very broadcategories:fundamental analysisandtechnical analysis. Fundamental analysis involves analyzing thecharacteristics of acompanyin order to estimate its value. Technical analysis takes a completely differentapproach; it doesn't care one bit about the "value" of a company or a commodity. Technicians sometimescalled chartists! are only interested in the price movements in the market.

espite all the fancy and e#otic tools it employs$ technical analysisreally %ust studies supplyand demandina market in an attempt to determine what direction$ or trend$will continue in the future. &n other words$

technical analysis attempts to understand the emotions in the market by studying the market itself$ asopposed to its components. &f you understand the benefits and limitations of technical analysis$ it can giveyou a new set of tools or skills that will enable you to be a better trader or investor.

&n this tutorial$ we'll introduce you to the sub%ect of technical analysis. &t's a broad topic$ so we'll %ust coverthe basics$ providing you with the foundation you'll need to understand more advanced concepts down theroad.

Next: Technical Analysis: The Basic Assumptions

Sponsor: Five Chart Patterns You Need To Know!FromChartAdvisor.com

Table of Contents! Technical (nalysis: &ntroduction

)! Technical (nalysis: The *asic (ssumptions

+! Technical (nalysis: Fundamental ,s. Technical (nalysis

-! Technical (nalysis: The se /f Trend

0! Technical (nalysis: 1upport (nd 2esistance

3! Technical (nalysis: The &mportance /f ,olume

4! Technical (nalysis: 5hat &s ( 6hart7
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8! Technical (nalysis: 6hart Types

9! Technical (nalysis: 6hart atterns

! Technical (nalysis:


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Aow that you understand the philosophy behind technical analysis$ we'll get into e#plaining how it reallyworks. /ne of the best ways to understand what technical analysis is and is not! is to compare it tofundamental analysis. 5e'll do this in the ne#t section.

For further reading$ check outDefining Active Trading$ Day Trading Strategies For BeginnersandWhat CanInvestors Learn From Traders?.

"efinin% Acti$e Tradin%February 3$ )- B *y In$estopedia ,taff$ &nvestopedia.com!

(ll investors must reevaluate and refine their investing styles and strategies from time to time. (s we gaininvesting e#perience and knowledge$ our view ofthemarketis likely to change and most likely

broaden how we envision the e#tent of ourinvesting capacity. Those who want to try tooutperform the market > that is$ realize returnsgreater than the market average > might consideran active tradingstrategy$ even if only for aportion of theirportfolio.?ere we e#plain whatactive trading is$ how active traders view themarket$ their tools and investment vehicles andfinally$ the risks associated with their style.

What Is Acti$e Tradin%?The best way to understand active trading is todifferentiate it frombuy>and>holdinvesting$ which

is based on the belief that a good investment willbe profitable in the long term. This meansignoring day>to>day market fluctuations. sing abuy and hold strategy$ this kind of investor isindifferent to the short>term for two reasons: first$because he or she believes any momentaryeffects of short>term movements really are minorcompared to the long>term average$ and second$because short>term movements are nearlyimpossible to e#actly predict.

(n active trader$ on the other hand$ isn't keen on e#posing his or her investments to the effect of short>termlosses or missing the opportunity of short>term gains. &t's not surprising then$ that active traders see anaverage long>term return not as an insurmountable standard but as a run>of>the>mill e#pectation. To e#ceedthe standard$ or outperform the market$ the trader realizes that he or she must look for the profit potential in

the market's temporary trends$ which means trying to perceive a trend as it begins and predict where it willgo in the near future.

*elow is a chart that demonstrates the difference between the long and short>term movements of themarket. Aote that even though the securitymoves upward over time$ it e#periences many smaller trends inboth directions along the way.

'erformance and the ,hort Term
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Traders are 'active' because for them the importance of the market's short>term activity is magnified > thesemarket movements offer opportunity for acceleratedcapital gains.( trader's style determines the time framewithin which he or she looks for trends. 1ome look for trends within a span of a few months$ some within afew weeks$ and some within a few hours. *ecause a shorter period will see more definitive marketmovements$ a trader analyzing a shorter time frame will be more active$ e#ecuting more trades.

( greater number of trades doesn't necessarily e@ual greater profits. /utperforming the market doesn't

mean ma#imizing your activity$ but ma#imizing your opportunities with a strategy. (n active trader will striveto buyandsellor vice versa in the case of shorting!at the two e#tremes of a trend within a given timeframe. 5hen buying a stock$ a trader may try to buy it at the lowest point possible or an upwards turningpoint$ otherwise known as abottom! and then sell it when there are signs that it has hit a high point. Thesesigns are generally discerned by means of technical analysis tools$ which we discuss below. The more thetrader strives to buy and sell at the e#tremes$ the more aggressive > and risky > is his or her strategy.

term trader$ on the other hand$ stays invested in the security ifhe or she has confidence in its value$ even though it may be e#periencing a downward shift > the buy andhold investor must tolerate some losses that the trader believes are possible to avoid.

Technical Analysis

Cou need particular analytical techni@ues and tools to discern when a trend starts and when it will come toan end.Technical analysisspecializes in interpreting price trends$ identifying the best time to buy and sell asecurity with the use of charts. nlike fundamental analysis$ technical analysis sees price as an all>importantfactor that tells the direction a security will take in the short term. ?ere are three principles of technicalanalysis:

For the most part$ the current price of a stock already reflects the forces influencing it > such as

political$ economic and social changes > as well as people's perception of these events.

rices tend to move in trends.

?istory repeats itself.

From these three principles emerges a complicated discipline that designs specialindicatorsto help thetrader determine what will happen in the future. &ndicators are ways in which price data is processed usuallyby means of a calculation! in order to clarify price patterns$ which become apparent when the results of theindicator's calculation are plotted on a chart. isplayed together with plotted historical prices$ theseindicators can help the trader discern trend lines and analyze them$ reading signals emitted by the indicatorin order to choose entry into or e#it from the trade. 1ome e#amples of the many different types of indicatorsaremoving averages$ relative strengthandoscillators.For a more detailed introduction to technicalanalysis$ check out this tutorial.!

Fundamental analysis can be used to trade$ but most traders are well trained and e#perienced in thetechni@ues of charting and technical analysis. &t is a blend of science and art that re@uires patience anddedication. *ecause timing is of the utmost importance in active trading$ efficiency in technical analysis is agreat determiner of success.

-e$era%eThe short term approach of investing offers opportunities to realize capital gains not only by means of trendanalysis$ but also through short>term investing devices that amplify potential gains given the amountinvested. /ne of these techni@ues is leveraging$which is often implemented by something calledmargin.


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you'd be left with D4$0 we'll assume interest charges are zero!$ giving you a D)$0 profit or a return of0E. ?ad you invested only D0$$ your profit would've been only D$)0. &n other words$ margin doubledyour return.

?owever$ as the upside potential is e#acerbated$ so is the downside risk. &f the above investment insteade#perienced a )0E decline$ you would have suffered a loss of 0E$ and if the investment e#perienced a0E decline$ you would've lost E. Cou may have already guessed that$ with leverage$ a trader can lose

more than his or her initial investment (s such it is a trading tool that should be used only by e#periencedtraders who are skilled at the art of timing entry into and e#it from investments. (lso$ since margin isborrowed money$ the less time you take to pay it back$ the less interest you pay on it. &f you take a long timeto try to reap profits from a trade$ the cost of margin can eat into your overall return.

The *is!s(ctive trading offers the enticing potential of above>average returns$ but like almost anything else that'senticing$ it cannot be achieved successfully without costs and risks.

The shorter time frame to which traders devote themselves offers a vast potential but$ because the marketcan move fast$ the trader must know how to read it and then react. 5ithout skill in discerning signals andtiming entries and e#its$ the trader may not only miss opportunities but also suffer the blow of rapid losses >especially if$ as we e#plained above$ the trader is riding on high leverage. Thus$ learning to trade is bothtime consuming and e#pensive. (ny person thinking of becoming an active trader should take this intoaccount.

(lso the higher fre@uency oftransactionsof active trading doesn't come for free: brokerage commissionsareplaced on every trade and$ since these commissions are an e#pense$ they eat into the trader's return.*ecause every trade costs money$ a trader must be confident in his or her decision: to achieve profits$ thereturn of a trade must be well above the commission. &f a trader is not sure of what he or she is doing andends up trading more fre@uently because of blunders$ the brokerage costs will add up on top of any losses.

Finally$ because securities are being entered and e#ited so often$ the active trader will have to pay ta#es onany capital gains realized every year. This could differ from a more passive investor who holds investmentsfor numerous years and does not pay capital gains ta# on a yearly basis. 6apital gains ta# e#pense mustalso be factored in when an active trader is calculating overall return.

Conclusion(s you gain more education and e#perience as an investor$ you may become curious about the differentways to reach returns. &t is important to be willing to learn about different strategies and approaches$ but it is

e@ually important to know what suits your personality$ skills and risk tolerance. Cou may have guessed thatactive trading is best suited to those who are committed to taking control over their portfolio and pursuingtheir goals @uickly and aggressively. (ll of this re@uires a willingness to not only take risks$ but also keep upskills and efficiency. &f this sounds like you$ it may be time to start learning more

"ay Tradin% ,trate%ies or Be%innersFebruary 0$ )3 B *y +ustin /uepper

5hen people use the term "day trading"$ they mean the act of buying and selling a stock withinthe same day. ay traders seek to make profits by leveraginglarge amounts of capital to takeadvantage of small price movements in highly li@uid stocks or inde#es.?ere we look at somecommon day trading strategies that can be used by retail traders.
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#ntry ,trate%ies6ertain stocks are ideal candidates for day trading. ( typical day trader looks for two things in astock: li@uidity and volatility. Gi@uidity allows you to enter and e#it a stock at a good price i.e.tight spreadsand low slippage!. ,olatility is simply a measure of the e#pected daily price range >the range in which a day trader operates. Gevel &&and H6Aprovide a look at orders as they happen.

*eal2Time Ne3s ,er$ice> Aews moves stocks. This tells you when news comes out.

5e will look at the intradaycandlestick charts and focus on the following three factors:

Candlestic! 'atterns> Hngulfings and do%is

Technical Analysis> Trendlinesand triangles

4olume> &ncreasing or decreasing volume

There are many candlestick setups that we can look for to find an entry point. &f properly used$ thedo%ireversalpattern highlighted in yellow in Figure ! is one of the most reliable ones.

Figure > Gooking at candlesticks > thehighlighted do%i signals a reversal.

Typically$ we will look for a pattern like this with several confirmations:

. First$ we look for a volumespike$which will show us whether traders are supporting the price at thislevel. Aote that this can be either on the do%i candle$ or on the candles immediately following it.

). 1econd$ we look for prior supportat this price level. For e#ample$ the prior low of day G/! or highof day ?/!.

+. 5e look at the Gevel && situation$ which will show us all the open orders and order sizes.

&f we follow these three steps$ we can determine whether the do%i is likely to produce an actual turnaround$and we can take a position if the conditions are favorable. Typically$ entry points are found using acombination of these three tools.
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indin% a Tar%et&dentifying a price target will depend largely on your trading style. ?ere is a brief overview of some commonday trading strategies:

,trate%y "escription

,calpin% 1calpingis one of the most popular strategies$and it involves selling almost immediately after atrade becomes profitable. Here the rice target iso!vious"y #ust after rofita!i"ity is attained$

adin% Fadinginvolves shorting stocks after rapidmoves upwards. This is based on theassumption that ! they are overbought$ )!early buyers are ready to begin taking profits and+! e#isting buyers may be scared out. (lthoughrisky$ this strategy can be e#tremely rewarding.Here the rice target is %hen !uyers !eginsteing in again$

"aily 'i$ots This strategy involves profiting from a stock'sdaily volatility. This is done by attempting to buy

at the low of the day G/! and sell at the high ofthe day ?/!. Here the rice target is sim"y atthe ne&t sign of a reversa"' using the same

atterns as a!ove$

omentum This strategy usually involves trading on newsreleases or finding strong trending movessupported by high volume. /ne type ofmomentum trader will buy on news releases andride a trend until it e#hibits signs of reversal. Theother type will fade the price surge. Here the

rice target is %hen vo"ume !egins to decreaseand !earish cand"es start aearing$

Cou can see that$ although the entries in day trading strategies typically rely on the same tools used innormal trading$ the e#its are where the differences occur. &n most cases$ however$ you will be looking to e#itwhen there is decreased interest in the stock indicated by the Gevel &&IH6A and volume!. For furtherreading$ see Introduction To Tyes (f Trading: )omentum Traders and Introduction To Tyes (f Trading:Sca"ers.!

"eterminin% a ,top2-oss5hen you trade onmargin$ you are far more vulnerable to sharp price movements than regular traders.Therefore$ using stop>lossesis crucial when day trading. /ne strategy is to set two stop losses:

. ( physical stop>loss order placed at a certain price level that suits your risk tolerance. Hssentially$this is the most you want to lose.

). ( mental stop>loss set at the point where your entry criteria are violated. This means that if thetrade makes an une#pected turn$ you'll immediately e#it your position.

2etail day traders usually also have another rule: set a ma#imum loss per day that you can afford bothfinancially and mentally! to withstand. 5henever you hit this point$ take the rest of the day off. &ne#periencedtraders often feel the need to make up losses before the day is over and end up taking unnecessary risks asa result. To learn more$ seeThe Sto*Loss (rder * )a+e Sure ,ou -se It.!
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#$aluatin% and T3ea!in% 'erformance


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IH! then was +.8$ and by the end of )0$ the IH was .8). Frisch's put up some greatnumbers$ but shareholders suffered anyway.

day moving averageat the time earnings were released$ andthey had made a clear bearish reversalpattern over the two weeks prior to that. &n retrospect$ anyinvestor would have appreciated a trader's ability to recognize that this particular stock was likelyheaded lower.

$ 0>$ >$ )> and )0>day moving averages!$ then that stockis probably headed lower > regardless of what the fundamentals look like. There's an old 5all1treet saying that cautions$ "on't buy stocks$ buy companies." &nvestors tend to buy companies$while traders tend to buy stocks. ?owever$ the very best investors soon realize that bothcomponents are re@uired in order to achieve top results. *efore you make an investment$ it'sworth a look to see if it's actually moving in the right direction$ or if it's above most of its movingaverages. To learn more$ see the )oving Averagestutorial and Basics (f )oving Averages.!

Technical Analysis Isn9t Bad If It9s "one *i%ht

Technical analysis$ behavioral analysis$ chart watching or voodoo > call it what you want. (t somepoint$ most traditional investment advisors have poked fun at this approach. &n some cases$ theribbing is deserved. There are plenty of technical analysts who have promised untold fortunesbased on their trading systems$ then failed to deliver. To learn more$ read the Introduction ToTechnica" Ana"ysistutorial andIntroduction To Tyes (f Trading: Technica" Traders.!

The fact of the matter is that there is no secret chart>watching techni@ue that is guaranteed togenerate wealth. /nce an investor recognizes this fact$ he or she can start to use technicalanalysis properly > as a tool to help weigh the odds of a stock taking a particular course over acertain time frame. (t the very least$ every investor should be aware of what kinds of returnenhancements proper chart analysis can provide.

For starters$ charts and market timing can provide an edge on entries and e#its. For e#ample$ in

)0$ the1L 0gained a net of only +E$ but the total movement of thislarge>capinde# wasactually much higher. Take a look at the ma%or up and down trendsof the 1L 0 for that year:

=anuary to =anuary ): own +.8E=anuary ) to


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The one caveat for investors is this: don't get bogged down by daily charts or short>term movingaverages. 5eekly charts are less erratic and$ therefore$ easier to interpret. picker. /r worse$ that investor is apt tohold onto a loser$ allowing ego to convince him or her that the decision was the right one and it

%ust needs more time. &t's what many call the "it'll come back" syndrome. &t's also a dangeroushabit that investors need to unlearn$ like most traders already have. 1ee When Fear And /reedTa+e (verand Limiting Losses.!

ConclusionTraders and investors are treated like night and day when$ in fact$ both types of marketparticipants are trying to accomplish the same goal. ?owever$ by incorporating some of the bestpractices of top traders$ investors can greatly improve portfolio returns.

Technical Analysis: undamental 4s. TechnicalAnalysis

Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. (swe've mentioned$ technical analysis looks at the price movement of a security and uses this datato predictits future price movements. Fundamental analysis$ on the other hand$ looks at economic factors$ known as

fundamentals. Get's get into the details of how these two approaches differ$ the criticisms against technicalanalysis and how technical and fundamental analysis can be used together to analyze securities.
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The "ifferencesCharts vs$ Financia" Statements(t the most basic level$ a technical analyst approaches a security from the charts$ while a fundamentalanalyst starts with the financial statements. For further reading$ seeIntroduction To Fundamenta" Ana"ysisandAdvanced Financia" Statement Ana"ysis.!

*y looking at the balance sheet$ cash flow statementand income statement$ a fundamental analyst tries to

determine a company's value. &n financial terms$ an analyst attempts to measure a company's intrinsicvalue. &n this approach$ investment decisions are fairly easy to make > if the price of a stock trades below itsintrinsic value$ it's a good investment. (lthough this is an oversimplification fundamental analysis goesbeyond %ust the financial statements! for the purposes of this tutorial$ this simple tenet holds true.

Technical traders$ on the other hand$ believe there is no reason to analyze a company's fundamentalsbecause these are all accounted for in the stock's price. Technicians believe that all the information theyneed about a stock can be found in its charts.

Time Hori0onFundamental analysis takes a relatively long>term approach to analyzing the market compared to technicalanalysis. 5hile technical analysis can be used on a timeframe of weeks$ days or even minutes$ fundamentalanalysis often looks at data over a number of years.

The different timeframes that these two

approaches use is a result of the nature of theinvesting style to which they each adhere. &t cantake a long time for a company's value to bereflected in the market$ so when a fundamentalanalyst estimates intrinsic value$ a gain is notrealized until the stock's market price rises to its"correct" value. This type of investing is calledvalue investingand assumes that the short>termmarket is wrong$ but that the price of a particularstock will correct itself over the long run. This "longrun" can represent a timeframe of as long asseveral years$ in some cases. For more insight$readWarren Buffett: Ho% He Does ItandWhat IsWarren Buffett1s Investing Sty"e?!

Furthermore$ the numbers that a fundamentalistanalyzes are only released over long periods oftime. Financial statements are filed @uarterly andchanges in earnings per sharedon't emerge on adaily basis like price and volume information. (lso remember that fundamentals are the actualcharacteristics of a business. Aew management can't implement sweeping changes overnight and it takestime to create new products$ marketing campaigns$ supply chains$ etc. art of the reason that fundamentalanalysts use a long>term timeframe$ therefore$ is because the data they use to analyze a stock is generatedmuch more slowly than the price and volume data used by technical analysts.

Trading 2ersus InvestingAot only is technical analysis more short term in nature that fundamental analysis$ but the goals of apurchase or sale! of a stock are usually different for each approach. &n general$ technical analysis is usedfor atrade$ whereas fundamental analysis is used to make an investment.&nvestors buy assets they believecan increase in value$ while traders buy assets they believe they can sell to somebody else at a greaterprice. The line between a trade and an investment can be blurry$ but it does characterize a differencebetween the two schools.

The Critics1ome critics see technical analysis as a form of black magic. on't be surprised to see them @uestion thevalidity of the discipline to the point where they mock its supporters. &n fact$ technical analysis has onlyrecently begun to en%oy some mainstream credibility. 5hile most analysts on 5all 1treet focus on thefundamental side$ %ust about any ma%or brokerage now employs technical analysts as well.

specifically the efficient market
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Figure

&t isn't hard to see that the trend in Figure is up. ?owever$ it's not always this easy to see a trend:

Figure )

There are lots of ups and downs in this chart$ but there isn't a clear indication of which direction thissecurity is headed.

A ore ormal "efinitionnfortunately$ trends are not always easy to see. &n other words$ defining a trend goes well beyond theobvious. &n any given chart$ you will probably notice that prices do not tend to move in a straight line inany direction$ but rather in a series of highs and lows. &n technical analysis$ it is the movement of thehighs and lows that constitutes a trend. For e#ample$ anuptrendis classified as a series of higher highsand higher lows$ while a downtrend is one of lower lows and lower highs.
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Figure +

Figure + is an e#ample of an uptrend. oint ) in the chart is the first high$ which is determined after theprice falls from this point. oint + is the low that is established as the price falls from the high. For this toremain an uptrend$ each successive low must not fall below the previous lowest point or the trend isdeemed a reversal.

Types of TrendThere are three types of trend:

ptrends

owntrends

1idewaysI?orizontal Trends

(s the names imply$ when each successive peakandtroughis higher$ it's referred to as an upward trend.&f the peaks and troughs are getting lower$ it's a downtrend. 5hen there is little movement up or down inthe peaks and troughs$ it's a sideways or horizontal trend. &f you want to get really technical$ you mighteven say that a sideways trend is actually not a trend on its own$ but a lack of a well>defined trend ineither direction. &n any case$ the market can really only trend in these three ways: up$ down or nowhere.For more insight$ see4ea+*And*Trough Ana"ysis.!

Trend -en%ths

(long with these three trend directions$ there are three trend classifications. ( trend of any direction canbe classified as a long>term trend$ intermediate trend or a short>term trend. &n terms of the stock market$a ma%or trend is generally categorized as one lasting longer than a year. (n intermediate trend isconsidered to last between one and three months and a near>term trend is anything less than a month. (long>term trend is composed of several intermediate trends$ which often move against the direction of thema%or trend. &f the ma%or trend is upward and there is a downward correction in price movement followedby a continuation of the uptrend$ the correction is considered to be an intermediate trend. The short>termtrends are components of both ma%or and intermediate trends. Take a look a Figure - to get a sense ofhow these three trend lengths might look.
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Figure -

5hen analyzing trends$ it is important that the chart is constructed to best reflect the type of trend beinganalyzed. To help identify long>term trends$ weekly charts or daily charts spanning a five>year period areused by chartists to get a better idea of the long>term trend. aily data charts are best used whenanalyzing both intermediate and short>term trends. &t is also important to remember that the longer thetrend$ the more important it is; for e#ample$ a one>month trend is not as significant as a five>year trend.To read more$ seeShort*' Intermediate* And Long*Term Trends.!

Trendlines(trendlineis a simple charting techni@ue that adds a line to a chart to represent the trend in the marketor a stock. rawing a trendline is as simple as drawing a straight line that follows a general trend. Theselines are used to clearly show the trend and are also used in the identification of trend reversals.

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Figure 0

Channels

(channel$ or channel lines$ is the addition of two parallel trendlines that act as strong areas of supportand resistance. The upper trendline connects a series of highs$ while the lower trendline connects aseries of lows. ( channel can slopeupward$ downwardorsidewaysbut$ regardless of the direction$ theinterpretation remains the same. Traders will e#pect a given security to trade between the two levels ofsupport and resistance until it breaks beyond one of the levels$ in which case traders can e#pect a sharpmove in the direction of the break. (long with clearly displaying the trend$ channels are mainly used toillustrate important areas of support and resistance.

Figure 3

Figure 3 illustrates a descending channel on a stock chart; the upper trendline has been placed on thehighs and the lower trendline is on the lows. The price has bounced off of these lines several times$ andhas remained range>bound for several months. (s long as the price does not fall below the lower line ormove beyond the upper resistance$ the range>bound downtrend is e#pected to continue.

The Importance of Trend&t is important to be able to understand and identify trends so that you can trade with rather than againstthem. Two important sayings in technical analysis are "the trend is your friend" and "don't buck the trend$"illustrating how important trend analysis is for technical traders.
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Technical Analysis: ,upport And *esistance

/nce you understand the concept of a trend$ the ne#t ma%or concept is that of support and resistance. Cou'lloften hear technical analysts talk about the ongoing battle between the bullsand the bears$ or the strugglebetween buyers demand! and sellers supply!. This is revealed by the prices a security seldom movesabove resistance! or below support!.

Figure

(s you can see in Figure $ support is the price level through which a stock or market seldom fallsillustrated by the blue arrows!. 2esistance$ on the other hand$ is the price level that a stock or marketseldom surpasses illustrated by the red arrows!.

Why "oes it )appen?These support and resistance levels are seen as important in terms of market psychology and supply anddemand. 1upport and resistance levels are the levels at which a lot of traders are willing to buy the stock in

the case of a support! or sell it in the case of resistance!. 5hen these trendlines are broken$ the supply anddemand and the psychology behind the stock's movements is thought to have shifted$ in which case newlevels of support and resistance will likely be established.

*ound Numbers and ,upport and *esistance/ne type of universal support and resistance that tends to be seen across a large number of securities isround numbers. 2ound numbers like $ )$ +0$ 0$ and $ tend be important in support andresistance levels because they often represent the ma%or psychological turning points at which many traderswill make buy or sell decisions.

*uyers will often purchase large amounts of stock once the price starts to fall toward a ma%or round numbersuch as D0$ which makes it more difficult for shares to fall below the level. /n the other hand$ sellers startto sell off a stock as it moves toward a round number peak$ making it difficult to move past this upper levelas well. &t is the increased buying and selling pressure at these levels that makes them important points ofsupport and resistance and$ in many cases$ ma%or psychological points as well.

*ole *e$ersal/nce a resistance or support level is broken$ its role is reversed. &f the price falls below a support level$ thatlevel will become resistance. &f the price rises above a resistance level$ it will often become support. (s theprice moves past a level of support or resistance$ it is thought that supply and demand has shifted$ causingthe breached level to reverse its role. For a true reversal to occur$ however$ it is important that the pricemake a strong move through either the support or resistance. For further reading$ see 6etracement (r6eversa": .no% The Difference.!
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1upport and resistance analysis is an important part of trends because it can be used to make tradingdecisions and identify when a trend is reversing. For e#ample$ if a trader identifies an important level ofresistance that has been tested several times but never broken$ he or she may decide to take profits as thesecurity moves toward this point because it is unlikely that it will move past this level.

1upport and resistance levels both test and confirm trends and need to be monitored by anyone who usestechnical analysis. (s long as the price of the share remains between these levels of support and resistance$

the trend is likely to continue. &t is important to note$ however$ that a break beyond a level of support orresistance does not always have to be a reversal. For e#ample$ if prices moved above the resistance levelsof an upward trending channel$ the trend has accelerated$ not reversed. This means that the priceappreciation is e#pected to be faster than it was in the channel.

*eing aware of these important support and resistance points should affect the way that you trade a stock.Traders should avoid placing orders at these ma%or points$ as the area around them is usually marked by alot of volatility. &f you feel confident about making a trade near a support or resistance level$ it is importantthat you follow this simple rule: do not place orders directly at the support or resistance level. This isbecause in many cases$ the price never actually reaches the whole number$ but flirts with it instead. 1o ifyou're bullish on a stock that is moving toward an important support level$ do not place the trade at thesupport level. &nstead$ place it above the support level$ but within a few points. /n the other hand$ if you areplacing stopsorshort selling$set up your trade price at or below the level of support.

Technical Analysis: The Importance 6f 4olume

To this point$ we've only discussed the price of a security. 5hile price is the primary item of concern intechnical analysis$volume is also e#tremely important.

What is 4olume?,olume is simply the number of shares or contracts that trade over a given period of time$ usually a day. Thehigher the volume$ the more active the security. To determine the movement of the volume up or down!$chartists look at the volume bars that can usually be found at the bottom of any chart. ,olume bars illustratehow many shares have traded per period and show trends in the same way that prices do. For furtherreading$ see 4rice 4atterns * 4art $/auging Suort And 6esistance With 4rice By 2o"ume.!

Why 4olume is Important,olume is an important aspect of technical analysis because it is used to confirm trends and chart patterns.(ny price movement up or down with relatively high volume is seen as a stronger$ more relevant movethan a similar move with weak volume. Therefore$ if you are looking at a large price movement$ you shouldalso e#amine the volume to see whether it tells the same story.
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1ay$ for e#ample$ that a stock %umps 0E in one trading day after being in a long downtrend. &s this a sign ofa trend reversal7 This is where volume helps traders. &f volume is high during the day relative to the averagedaily volume$ it is a sign that the reversal is probably for real. /n the other hand$ if the volume is belowaverage$ there may not be enough conviction to support a true trend reversal. To read more$ check outTrading 2o"ume * Cro%d 4sycho"ogy.!

,olume should move with the trend. &f prices are moving in an upward trend$ volume should increase and

vice versa!. &f the previous relationship between volume and price movements starts to deteriorate$ it isusually a sign of weakness in the trend. For e#ample$ if the stock is in an uptrend but the up trading days aremarked with lower volume$ it is a sign that the trend is starting to lose its legs and may soon end.

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Figure

Figure provides an e#ample of a basic chart. &t is a representation of the price movements of a stock overa .0 year period. The bottom of the graph$ running horizontally #>a#is!$ is the date or time scale. /n theright hand side$ running vertically y>a#is!$ the price of the security is shown. *y looking at the graph we seethat in /ctober )- oint !$ the price of this stock was around D)-0$ whereas in =une )0 oint )!$ thestock's price is around D)30. This tells us that the stock has risen between /ctober )- and =une )0.

Chart 'ropertiesThere are several things that you should be aware of when looking at a chart$ as these factors can affect theinformation that is provided. They include the time scale$ the price scale and the price point properties used.

The Time Sca"eThe time scale refers to the range of dates at the bottom of the chart$ which can vary from decades toseconds. The most fre@uently used time scales areintraday$daily$ weekly$ monthly$ @uarterlyand annually.The shorter the time frame$ the more detailed the chart. Hach data point can represent the closing price ofthe period or show the open$ the high$ the low and the close depending on the chart used.

&ntraday charts plot price movement within the period of one day. This means that the time scale could be asshort as five minutes or could cover the whole trading day from the opening bellto the closing bell.

aily charts are comprised of a series of price movements in which each price point on the chart is a fulldayMs trading condensed into one point. (gain$ each point on the graph can be simply the closing price orcan entail the open$ high$ low and close for the stock over the day. These data points are spread out overweekly$ monthly and even yearly time scales to monitor both short>term and intermediate trends in pricemovement.

5eekly$ monthly$ @uarterly and yearly charts are used to analyze longer term trends in the movement of astock's price. Hach data point in these graphs will be a condensed version of what happened over thespecified period. 1o for a weekly chart$ each data point will be a representation of the price movement of theweek. For e#ample$ if you are looking at a chart of weekly data spread over a five>year period and each data

point is the closing price for the week$ the price that is plotted will be the closing price on the last trading dayof the week$ which is usually a Friday.

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)ere to learn more

The 4rice Sca"e and 4rice 4oint 4roertiesThe price scale is on the right>hand side of the chart. &t shows a stock's current price and compares it to pastdata points. This may seem like a simple concept in that the price scale goes from lower prices to higherprices as you move along the scale from the bottom to the top. The problem$ however$ is in the structure of

the scale itself. ( scale can either be constructed in a lineararithmetic! orlogarithmicway$ and both ofthese options are available on most charting services.

&f a price scale is constructed using a linear scale$ the space between each price point $ )$ +$ -! isseparated by an e@ual amount. ( price move from to ) on a linear scale is the same distance on thechart as a move from - to 0. &n other words$ the price scale measures moves in absolute terms and doesnot show the effects of percent change.

Figure )

&f a price scale is in logarithmic terms$ then the distance between points will be e@ual in terms of percentchange. ( price change from to ) is a E increase in the price while a move from - to 0 is only a

)0E change$ even though they are represented by the same distance on a linear scale. /n a logarithmicscale$ the distance of the E price change from to ) will not be the same as the )0E change from -to 0. &n this case$ the move from to ) is represented by a larger space one the chart$ while the movefrom - to 0$ is represented by a smaller space because$ percentage>wise$ it indicates a smaller move. &nFigure )$ the logarithmic price scale on the right leaves the same amount of space between and ) as itdoes between ) and - because these both represent E increases.

Technical Analysis: Chart Types

There are four main types of charts that are used by investors and traders depending on the information thatthey are seeking and their individual skill levels. The chart types are: the line chart$ the bar chart$ thecandlestick chart and the point and figure chart. &n the following sections$ we will focus on the 1L 0&nde#during the period of =anuary )3 through


23/41

Figure : ( line chart

Bar Charts

The bar charte#pands on the line chart by adding several more key pieces of information to each data point.The chart is made up of a series of vertical lines that represent each data point. This vertical line representsthe high and low for the trading period$ along with the closing price. The close and open are represented onthe vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that islocated on the left side of the vertical bar. 6onversely$ the close is represented by the dash on the right.Kenerally$ if the left dash open! is lower than the right dash close! then the bar will be shaded black$representing an up period for the stock$ which means it has gained value. ( bar that is colored red signalsthat the stock has gone down in value over that period. 5hen this is the case$ the dash on the right close! islower than the dash on the left open!.

Figure ): ( bar chart

Candlestic! ChartsThe candlestickchart is similar to a bar chart$ but it differs in the way that it is visually constructed. 1imilar tothe bar chart$ the candlestick also has a thin vertical line showing the period's trading range. The differencecomes in the formation of a wide bar on the vertical line$ which illustrates the difference between the openand close. (nd$ like bar charts$ candlesticks also rely heavily on the use of colors to e#plain what hashappened during the trading period. ( ma%or problem with the candlestick color configuration$ however$ isthat different sites use different standards; therefore$ it is important to understand the candlestick
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configuration used at the chart site you are working with. There are two color constructs for days up and onefor days that the price falls. 5hen the price of the stock is up and closes above the opening trade$ thecandlestick will usually be white or clear. &f the stock has traded down for the period$ then the candlestick willusually be red or black$ depending on the site. &f the stock's price has closed above the previous dayMs closebut below the day's open$ the candlestick will be black or filled with the color that is used to indicate an upday. To read more$ seeThe Art (f Cand"estic+ Charting * 4art 8$ 4art 9$ 4art and4art ;.!

Figure +: ( candlestick chart

'oint and i%ure ChartsThe point and figure chartis not well known or used by the average investor but it has had a long history ofuse dating back to the first technical traders. This type of chart reflects price movements and is not asconcerned about time and volume in the formulation of the points. The point and figure chart removes thenoise$or insignificant price movements$ in the stock$ which can distort traders' views of the price trends.These types of charts also try to neutralize the skewingeffect that time has on chart analysis. For furtherreading$ see 4oint And Figure Charting.!

Figure -: ( point and figure chart

5hen first looking at a point and figure chart$ you will notice a series of Ns and /s. The Ns represent upwardprice trends and the /s represent downward price trends. There are also numbers and letters in the chart;these represent months$ and give investors an idea of the date. Hach bo# on the chart represents the price
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scale$ which ad%usts depending on the price of the stock: the higher the stock's price the more each bo#represents. /n most charts where the price is between D) and D$ a bo# represents D$ or point for thestock. The other critical point of a point and figure chart is the reversal criteria. This is usually set at three butit can also be set according to the chartist's discretion. The reversal criteria set how much the price has tomove away from the high or low in the price trend to create a new trend or$ in other words$ how much theprice has to move in order for a column of Ns to become a column of /s$ or vice versa. 5hen the price trendhas moved from one trend to another$ it shifts to the right$ signaling a trend change.



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signals that the upward trend is about to end. ?ead and shoulders bottom$ also known as inverse head andshouldersshown on the right! is the lesser known of the two$ but is used to signal a reversal in adowntrend.

Figure : ?ead and shoulders top is shown on the left. ?ead and shoulders bottom$ or inverse head andshoulders$ is on the right.

*oth of these head and shoulders patterns are similar in that there are four main parts: two shoulders$ ahead and aneckline.(lso$ each individual head and shoulder is comprised of a high and a low. Fore#ample$ in the head and shoulders top image shown on the left side in Figure $ the left shoulder is madeup of a high followed by a low. &n this pattern$ the neckline is a level of support or resistance. 2emember thatan upward trend is a period of successive rising highs and rising lows. The head and shoulders chartpattern$ therefore$ illustrates a weakening in a trend by showing the deterioration in the successivemovements of the highs and lows. To learn more$ see 4rice 4atterns * 4art 9.!

Cup and )andle(cup and handlechart is a bullish continuation pattern in which the upward trend has paused but willcontinue in an upward direction once the pattern is confirmed.

Figure )

(s you can see in Figure )$ this price pattern forms what looks like a cup$ which is preceded by an upward
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trend. The handle follows the cup formation and is formed by a generally downwardIsideways movement inthe security's price. /nce the price movement pushes above the resistance lines formed in the handle$ theupward trend can continue. There is a wide ranging time frame for this type of pattern$ with the span rangingfrom several months to more than a year.

"ouble Tops and BottomsThis chart pattern is another well>known pattern that signals a trend reversal > it is considered to be one of

the most reliable and is commonly used. These patterns are formed after a sustained trend and signal tochartists that the trend is about to reverse. The pattern is created when a price movement tests support orresistance levels twice and is unable to break through. This pattern is often used to signal intermediate andlong>term trend reversals.

Figure +: ( double top pattern is shown on the left$ while a double bottom pattern is shown on the right.

&n the case of thedouble toppattern in Figure +$ the price movement has twice tried to move above a certainprice level. (fter two unsuccessful attempts at pushing the price higher$ the trend reverses and the priceheads lower. &n the case of a double bottomshown on the right!$ the price movement has tried to go lowertwice$ but has found support each time. (fter the second bounce off of the support$ the security enters a newtrend and heads upward. For more in>depth reading$ seeThe )emory (f 4riceand 4rice 4atterns * 4art ;.!

Trian%lesTrianglesare some of the most well>known chart patterns used in technical analysis. The three types oftriangles$ which vary in construct and implication$ are the symmetrical triangle$ascendinganddescendingtriangle.These chart patterns are considered to last anywhere from a couple of weeks to several months.
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Figure -

The symmetrical triangle in Figure - is a pattern in which two trendlines converge toward each other. Thispattern is neutral in that a breakout to the upside or downside is a confirmation of a trend in that direction. &nan ascending triangle$ the upper trendline is flat$ while the bottom trendline is upward sloping. This isgenerally thought of as a bullish pattern in which chartists look for an upside breakout. &n a descendingtriangle$ the lower trendline is flat and the upper trendline is descending. This is generally seen as a bearish

pattern where chartists look for a downside breakout.

la% and 'ennantThese two short>term chart patterns are continuation patterns that are formed when there is a sharp pricemovement followed by a generally sideways price movement. This pattern is then completed upon anothersharp price movement in the same direction as the move that started the trend. The patterns are generallythought to last from one to three weeks.

Figure 0

(s you can see in Figure 0$ there is little difference between a pennantand aflag. The main difference
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Figure 4

6onfusion can form with triple tops and bottoms during the formation of the pattern because they can look

similar to other chart patterns. (fter the first two supportIresistance tests are formed in the price movement$the pattern will look like a double top or bottom$ which could lead a chartist to enter a reversal position toosoon.

)i%h 'robability Tradin% ,etups for the Currency ar!et 2 Ne3 eboo!;&n this e>book we have put together a logical and intelligent approach to currencytrading utilizing our latest and best setups. &n ?igh robability 1etups for the6urrency term reversal pattern that signals a shiftfrom a downward trend to an upward trend. This pattern is traditionally thought to last anywhere from severalmonths to several years.

Figure 8
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( rounding bottom chart pattern looks similar to a cup and handle pattern but without the handle. The long>term nature of this pattern and the lack of a confirmation trigger$ such as the handle in the cup and handle$makes it a difficult pattern to trade.

5e have finished our look at some of the more popular chart patterns. Cou should now be able to recognizeeach chart pattern as well the signal it can form for chartists. 5e will now move on to other technical

techni@ues and e#amine how they are used by technical traders to gauge price movements.Technical Analysis: o$in% A$era%es

to>day fluctuations areremoved$ traders are better able to identify the true trend and increase the probability that it will work in theirfavor. To learn more$ read the)oving Averagestutorial.!

Types of o$in% A$era%esThere are a number of different types of movingaverages that vary in the way they are calculated$

but how each average is interpreted remains thesame. The calculations only differ in regards to theweighting that they place on the price data$ shiftingfrom e@ual weighting of each price point to moreweight being placed on recent data. The threemost common types of moving averages aresimple$ linear and e#ponential.

,imple o$in% A$era%e day moving average$ the last closing prices are added together and then divided by . (s you cansee in Figure $ a trader is able to make the average less responsive to changing prices by increasing thenumber of periods used in the calculation. &ncreasing the number of time periods in the calculation is one ofthe best ways to gauge the strength of the long>term trend and the likelihood that it will reverse.

Figure


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series has the same impact on the result regardless of where it occurs in the se@uence. The critics arguethat the most recent data is more important and$ therefore$ it should also have a higher weighting. This typeof criticism has been one of the main factors leading to the invention of other forms of moving averages.

-inear Wei%hted A$era%eThis moving average indicator is the least common out of the three and is used to address the problem ofthe e@ual weighting. The linear weighted moving average is calculated by taking the sum of all the closing

prices over a certain time period and multiplying them by the position of the data point and then dividing bythe sum of the number of periods. For e#ample$ in a five>day linear weighted average$ today's closing priceis multiplied by five$ yesterday's by four and so on until the first day in the period range is reached. Thesenumbers are then added together and divided by the sum of the multipliers.

#xponential o$in% A$era%e period Hperiod 1or 8ses of o$in% A$era%es


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Figure +

(nother method of determining momentum is to look at the order of a pair of moving averages. 5hen ashort>term average is above a longer>term average$ the trend is up. /n the other hand$ a long>term average

above a shorter>term average signals a downward movement in the trend.

period moving average$ like in Figure -$ it is a sign that the uptrend may bereversing.

Figure -

The other signal of a trend reversal is when one moving average crosses through another. For e#ample$ asyou can see in Figure 0$ if the 0>day moving average crosses above the 0>day moving average$ it is apositive sign that the price will start to increase.
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to>day pricemovements$ giving traders a clearer view of the price trend. 1o far we have been focused on pricemovement$ through charts and averages. &n the ne#t section$ we'll look at some other techni@ues used toconfirm price movement and patterns.

Technical Analysis: Indicators And 6scillators

&ndicatorsare calculations based on the price and the volume of a security that measure such things asmoney flow$ trends$ volatilityand momentum. &ndicators are used as a secondary measure to the actualprice movements and add additional information to the analysis of securities. &ndicators are used in two mainways: to confirm price movement and the @uality of chart patterns$ and to form buy and sell signals.

There are two main types of indicators: leadingand lagging. ( leading indicator precedes price movements$giving them a predictive @uality$ while a lagging indicator is a confirmation tool because it follows pricemovement. ( leading indicator is thought to be the strongest during periods of sideways or non>trendingtrading ranges$ while the lagging indicators are still useful during trending periods.

There are also two types of indicator constructions:those that fall in a bounded rangeand those thatdo not. The ones that are bound within a range arecalled oscillators> these are the most common

type of indicators. /scillator indicators have arange$ for e#ample between zero and $ andsignal periods where the security is overboughtnear ! or oversold near zero!. Aon>boundedindicators still form buy and sell signals along withdisplaying strength or weakness$ but they vary inthe way they do this.

The two main ways that indicators are used to formbuy and sell signals in technical analysis is throughcrossoversanddivergence. 6rossovers are themost popular and are reflected when either theprice moves through the moving average$ or whentwo different moving averages cross over eachother.The second way indicators are used isthrough divergence$ which happens when thedirection of the price trend and the direction of the indicator trend are moving in the opposite direction. Thissignals to indicator users that the direction of the price trend is weakening.

&ndicators that are used in technical analysis provide an e#tremely useful source of additional information.These indicators help identify momentum$ trends$ volatility and various other aspects in a security to aid inthe technical analysis of trends. &t is important to note that while some traders use a single indicator solelyfor buy and sell signals$ they are best used in con%unction with price movement$ chart patterns and otherindicators.

Accumulation"istribution -ineThe accumulationIdistributionline is one of the more popular volume indicators that measures money flowsin a security. This indicator attempts to measure the ratio of buying to selling by comparing the pricemovement of a period to the volume of that period.

6alculated:

Acc"ist


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against a centerline. The centerline is the point at which the two moving averages are e@ual. (long with the


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Figure +

The standard calculation for 21& uses - trading days as the basis$ which can be ad%usted to meet theneeds of the user. &f the trading period is ad%usted to use fewer days$ the 21& will be more volatile and willbe used for shorter term trades. To read more$ see )omentum And The 6e"ative Strength Inde&$ 6e"ativeStrength Inde& And Its Fai"ure*S%ing 4ointsand /etting To .no% (sci""ators * 4art 8and 4art 9.!

6n2Balance 4olumeThe on>balance volume/*,! indicator is a well>known technical indicator that reflect movements involume. &t is also one of the simplest volume indicators to compute and understand.

The /*, is calculated by taking the total volume for the trading period and assigning it a positive or negativevalue depending on whether the price is up or down during the trading period. 5hen price is up during thetrading period$ the volume is assigned a positive value$ while a negative value is assigned when the price isdown for the period. The positive or negative volume total for the period is then added to a total that is

accumulated from the start of the measure.

&t is important to focus on the trend in the /*, > this is more important than the actual value of the /*,measure. This measure e#pands on the basic volume measure by combining volume and price movement.For more insight$ see Introduction To (n*Ba"ance 2o"ume.!



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second line is the E$ which is simply a moving average of the EJ. The E line is considered to be themore important of the two lines as it is seen to produce better signals. The stochastic oscillator generallyuses the past - trading periods in its calculation but can be ad%usted to meet the needs of the user. Toread more$ check out /etting To .no% (sci""ators * 4art .!

Figure -

Technical Analysis:Conclusion

This introductory section of the technical analysistutorial has provided a broad overview of technicalanalysis.

?ere's a brief summary of what we've covered:

Technical analysisis a method ofevaluating securities by analyzing thestatistics generated by market activity. &t isbased on three assumptions: ! themarket discounts everything$ )! pricemoves in trends and +! history tends torepeat itself.

Technicians believe that all the information they need about a stock can be found in its charts.

Technical traders take a short>term approach to analyzing the market.

6riticism of technical analysis stems from the efficient market hypothesis$which states that the

market price is always the correct one$ making any historical analysis useless.

/ne of the most important concepts in technical analysis is that of a trend$which is the general

direction that a security is headed. There are three types of trends:uptrends$downtrendsandsidewaysIhorizontal trends.

(trendlineis a simple charting techni@ue that adds a line to a chart to represent the trend in the

market or a stock.

(channel$or channel lines$ is the addition of two parallel trendlines that act as strong areas of

support and resistance.

1upportis the price level through which a stock or market seldom falls. 2esistanceis the price level

that a stock or market seldom surpasses.

,olumeis the number of shares or contracts that trade over a given period of time$ usually a day.

The higher the volume$ the more active the security.

( chart is a graphical representation of a series of prices over a set time frame.
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The time scale refers to the range of dates at the bottom of the chart$ which can vary from decades

to seconds. The most fre@uently used time scales areintraday$daily$ weekly$ monthly$ @uarterlyandannually.

The price scale is on the right>hand side of the chart. &t shows a stock's current price and compares

it to past data points. &t can be either linearor logarithmic.

There are four main types of charts used by investors and traders: line charts$ bar charts$

candlestick chartsandpoint and figure charts.

( chart pattern is a distinct formation on a stock chart that creates a trading signal$ or a sign of

future price movements. There are two types:reversalandcontinuation.

(head and shoulders patternis reversal pattern that signals a security is likely to move against its

previous trend.

(cup and handle patternis a bullish continuation pattern in which the upward trend has paused but

will continue in an upward direction once the pattern is confirmed.

ouble topsand double bottomsare formed after a sustained trend and signal to chartists that the

trend is about to reverse. The pattern is created when a price movement tests support or resistancelevels twice and is unable to break through.

(triangleis a technical analysis pattern created by drawing trendlines along a price range that gets

narrower over time because of lower tops and higher bottoms. ,ariations of a triangle includeascendingand descendingtriangles.

Flagsand pennantsare short>term continuation patterns that are formed when there is a sharp

price movement followed by a sideways price movement. The wedgechart pattern can be either a continuation or reversal pattern. &t is similar to a

symmetrical triangle e#cept that the wedge pattern slants in an upward or downward direction.

(gapin a chart is an empty space between a trading period and the following trading period. This

occurs when there is a large difference in prices between two se@uential trading periods.

Triple topsand triple bottomsare reversal patterns that are formed when the price movement tests

a level of support or resistance three times and is unable to break through$ signaling a trendreversal.

)i%h 'robability Tradin% ,etups for the Currency ar!et 2 Ne3 eboo!;&n this e>book we have put together a logical and intelligent approach to currencytrading utilizing our latest and best setups. &n ?igh robability 1etups for the

6urrency term reversal pattern that signals a shift from a

downward trend to an upward trend.

(moving averageis the average price of a security over a set amount of time. There are three

types:simple$linear ande#ponential.

to>day

price movements$ giving traders a clearer view of the price trend.

&ndicatorsare calculations based on the price and the volume of a security that measure such

things as money flow$ trends$ volatility and momentum. There are two types: leadingandlagging.

The accumulationIdistributionline is a volume indicator that attempts to measure the ratio of buying

to selling of a security.

The average directional inde#(N! is a trend indicator that is used to measure the strength of a

current trend.

The(roon indicatoris a trending indicator used to measure whether a security is in an uptrend or

downtrend and the magnitude of that trend.

The (roon oscillator plots the difference between the (roon up and down lines by subtracting the

two lines.

The moving average convergence divergence


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The relative strength inde#21&! helps to signal overbought and oversold conditions in a security.

The on>balance volume/*,! indicator is one of the most well>known technical indicators that

reflects movements in volume.

The stochastic oscillatorcompares a security's closing price to its price range over a given time

period.
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