Technical Analysis for Beginners

[hardik0007]

Dear veluri1967,

I like your previous post........... I decided i wont try any more indicators.

But Keltner Channels I have to learn. Keep going!!! :clap:

 

[veluri1967]

Dear veluri1967,

I like your previous post........... I decided i wont try any more indicators.

But Keltner Channels I have to learn. Keep going!!! :clap:

Dear hardik0007,

Thank you. I think new friends are busy scanning my analysis with the charts I posted.

I would be grateful if anybody acknowledge about its usefulness so that I will post my next one.

Friends....you will agree that I should have the feed back whether it is useful or not. It will help me to assess my postings whether to continue with it or not.

Thanks once again.
veluri1967:thumb:

 

[vishalalluri]

Dear hardik0007,

Thank you. I think new friends are busy scanning my analysis with the charts I posted. The stuff is really good. I spent nearly 5 hours on realtime charts to devise this post.

I would be grateful if anybody acknowledge about its usefulness so that I will post my next one.

Friends....you will agree that I should have the feed back whether it is useful or not. It will help me to assess my postings whether to continue with it or not.

Thanks once again.
veluri1967:thumb:

hi veluri

could not actively use traderji for 2 3 days great going hope too see more from u

 

[veluri1967]

Must know abt tech indicators

Multicollinearity is a problem that is common in technical analysis. That is, when one unknowingly uses the same type of information more than once. Analysts need to be careful and not utilize technical indicators that reveal the same type of information.

"A cardinal rule for the successful use of technical analysis requires avoiding multicollinearity amid indicators. Multicollinearity is simply the multiple counting of the same information. The use of four different indicators all derived from the same series of closing prices to confirm each other is a perfect example."

The issue of multicollinearity is a serious issue in technical analysis when your money is at stake. It is a problem because collinear variables contribute redundant information and can cause other variables to appear to be less important than they really are. One of the real problems is that sometimes multicollinearity is difficult to spot.

Technical indicators should be arranged in categories to keep from using too many from the same category. Hereunder different indicators are categorized for your information.


MOMENTUM INDICATORS :-

Rate of Change (ROC)
Stochastics (%K, %D)
Relative Strength Index (RSI)
Commodity Channel Index (CCI)
Williams %R (Wm%R)
StochRSI
TRIX
Ultimate Oscillator (ULT)
Aroon

TREND INDICATORS :-

Moving Averages
Moving Average Convergence Divergence (MACD)
Average True Range (ATR)
Wilder's DMI (ADX)
Price Oscillator (PPO)

VOLUME INDICATORS:-

Accumulation Distribution
Chaikin Money Flow (CMF)
Volume Rate of Change
Volume Oscillator (PVO)
Demand Index
On Balance Volume (OBV)
Money Flow Index

The best way to quickly determine if an indicator is collinear with another one is to chart it. Make sure you have enough data on the chart to get a good indication. If they basically rise and fall in about the same areas, the odds are that they are collinear and you should just use one of them.

CAUTION :If you are randomly selecting indicators to support your analysis, you will more than likely fall into the multicollinearity trap of using multiple indicators that are all saying the same thing. They are not giving you any additional information; in fact, they are restricting your overall view of the market. Don't search for supporting information among collinear indicators, it is just misleading.


veluri1967:thumb::clapping:

 

[vishalalluri]

Re: Must know abt tech indicators

Multicollinearity is a problem that is common in technical analysis. That is, when one unknowingly uses the same type of information more than once. Analysts need to be careful and not utilize technical indicators that reveal the same type of information.

"A cardinal rule for the successful use of technical analysis requires avoiding multicollinearity amid indicators. Multicollinearity is simply the multiple counting of the same information. The use of four different indicators all derived from the same series of closing prices to confirm each other is a perfect example."

The issue of multicollinearity is a serious issue in technical analysis when your money is at stake. It is a problem because collinear variables contribute redundant information and can cause other variables to appear to be less important than they really are. One of the real problems is that sometimes multicollinearity is difficult to spot.

Technical indicators should be arranged in categories to keep from using too many from the same category. Hereunder different indicators are categorized for your information.


MOMENTUM INDICATORS :-

Rate of Change (ROC)
Stochastics (%K, %D)
Relative Strength Index (RSI)
Commodity Channel Index (CCI)
Williams %R (Wm%R)
StochRSI
TRIX
Ultimate Oscillator (ULT)
Aroon

TREND INDICATORS :-

Moving Averages
Moving Average Convergence Divergence (MACD)
Average True Range (ATR)
Wilder's DMI (ADX)
Price Oscillator (PPO)

VOLUME INDICATORS:-

Accumulation Distribution
Chaikin Money Flow (CMF)
Volume Rate of Change
Volume Oscillator (PVO)
Demand Index
On Balance Volume (OBV)
Money Flow Index

The best way to quickly determine if an indicator is collinear with another one is to chart it. Make sure you have enough data on the chart to get a good indication. If they basically rise and fall in about the same areas, the odds are that they are collinear and you should just use one of them.

CAUTION :If you are randomly selecting indicators to support your analysis, you will more than likely fall into the multicollinearity trap of using multiple indicators that are all saying the same thing. They are not giving you any additional information; in fact, they are restricting your overall view of the market. Don't search for supporting information among collinear indicators, it is just misleading.


veluri1967:thumb::clapping:

HI VELURI

when i started with analysing the charts multi collinearity was the problem i got into but i was made aware of it during my early posts which made me realise that this happens anyways that time i had just had a look on wat it could be

this post detailed me more :clapping:

 

[veluri1967]

Categories of technical indicators

Dear Vishal,
That means you might have already categorised all the Tech indicators into different classifications. If you have any, please post them here.

thanks
veluri1967:thumb:

 

[vishalalluri]

Re: Categories of technical indicators

Dear Vishal,
That means you might have already categorised all the Tech indicators into different classifications. If you have any, please post them here.

thanks
veluri1967:thumb:

hi veluri not yet stongly catregorised

but a confirmation with rsi and macd
or
a stochastic with macd would work i guess

the point what we should realise is we using rsi and stochastic and trying to analyse a chart it makes less sense as both are momentum indicators so use one instead of two and confirm with any one of the trend indicator if it gives confirmation

just sharing my thought

 

[veluri1967]

John Murphy's Technical Trading

Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.


Determine the trend and follow it. Market trends come in many sizes long-term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.


Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies the old "low" can become the new "high."


Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.


Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.


Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.



Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.


Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.


Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.


"Technical analysis is a skill that improves with experience and study. Always be a student and keep learning. "- John Murphy


Happy learning with many many thanks to John Murphy.

veluri1967:thumb::clapping:

 

[vikas2659]

Before understanding Bollinger Bands, a knowledge about moving averages is of paramount importance.

Definition, explanation and basics of moving averages is deliberately ommitted as the same can be learned by browsing any technical indicators site.

Think differently and BE A WINNER. Make exploration of basics by practising and observing.

So, friends, here is the next post.

A Different Type of Moving Average Cross ​

Virtually every trader has dabbled with or experimented with some sort of moving average. What I want to introduce you to in this lesson is a different sort of moving average cross method, which I have found to be very good at identifying short term trend changes.


As we know a moving average is normally plotted using the close of a bar e.g. if you were plotting a 3 period moving average, then you would add the last three closes and divide the total by three to get a simple moving average.

This is where I want you to think a little differently.

I have always been an advocate of taking traditional thinking and changing it around.

What if you used the open instead of the close? What if you used the close of one period of a moving average and the open of another?

First, most charting packages will allow you to use the open, high, low or close to plot a moving average.

I use a 5 period exponential moving average of the close and a 6 period exponential moving average of the open on daily, hourly charts. My experience shows that it catches the short term trend changes really nicely.

Of course you will go through periods of consolidation with any market and any moving average method you use will be whipsawed. To get around this you need some sort of filter or approach that helps you keep out of the low probability trades.

You could use ADX, Stochastic or MACD to help filter the noise but I also like to add a time frame.

To help identify better entry points you can drop down a few time frames to the 30 minute chart.

There are lots of ways to trade this but a neat little trick is to wait for the signal on a higher time frame and then drop down a few time frames and wait for a pullback.

The first signal after the pullback on the lower time frame is normally a pretty good entry point e.g. If there were a cross up on the large time frame then drop down to a lower time frame and wait for the market to retrace and then give another buy signal (cross up). The opposite is true for short signals.

Once you get the signal on the shorter time frame depending on where support is you can usually place your first stop loss under the nearest support area (valley). If the market begins to make progress you can move your stop so that it trails the market by moving your stop to just under the most recent support area.


Here I used only an exponential moving average but as said earlier experiment with different types of average such as weighted, smoothed or simple. You can also experiment with different lengths of moving average.

Happy Experimenting & Learning

Thanks for sparing your valuable time to be with me.

veluri1967:thumb::rofl:

gud....keep going:clapping:

 

[veluri1967]

Choose a Chart Pattern to learn

Below is a list of common chart patterns that can be useful in Technical Analysis.

Friends...choose yourself which one is to be studied next and I will accomplish it choosing the most opted chart pattern.

Double Top
Double Bottom
Head and Shoulders Top
Head and Shoulders Bottom
Falling Wedge
Rising Wedge
Rounding Bottom
Triple Top
Triple Bottom
Bump and Run Reversal
Flag, Pennant
Symmetrical Triangle
Ascending Triangle
Descending Triangle
Rectangle
Price Channel (Continuation)
Measured Move - Bullish (Continuation)
Measured Move - Bearish (Continuation)
Cup with Handle


Go and post your choice.

veluri1967:thumb::clapping: