CHAPTER 1 – INTRO TO TECHNICAL ANALYSIS Flashcards

1
Q

Define Technical Analysis (TA)

A

TA is the study of market action (MA), which consist of price, volume and open interest through the analysis of price chart and oscillators to forecast future price trends and patterns

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2
Q

What are some key points of Technical Analysis (TA)? 8

A

 The study of market action is the study of human psychology, i.e. behavioral finance.
 Is actionable and shows you how to make money .
 Is not a “Holy Grail” and does not guarantee the making money in financial markets.
 Is an another very useful tool to “have in your toolbox.”
 Under certain market conditions these tools may not work (i.e. trading ranges and long-term forecasting).
 Market (prices) always lead fundamentals.
 Technical analysis measures the emotions present in all markets.
 Need to have a profound knowledge of TA to be a successful trader and gain actionable ideas to build a consistent trading system.

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3
Q

What are the assumptions of Technical Analysis (TA)?

A

 Humans behave in a similar manner: history repeats, if not it rhymes.
 Prices are determined by supply and demand.
 Price discounts all information: records transactions of all market participants.
 Prices develop acknowledged (recognizable) patterns.
 Prices trend; “the trend is your friend”.
 Patterns and trends are fractal in time and size.
◦ Trends act similar over different periods of time, shorter trends make up longer trends.

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4
Q

What do technical analysts believe in?

A

“the market is always correct.”

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5
Q

What are the 2 major ways that technical analysis is being used?

A

Predictive: use the analysis to make predictions about future market moves
Reactive: used to react to particular market conditions to make their decisions.

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6
Q

What is the main objective of technical analysts?

A

making money.

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