Introduction to Technical Analysis

Boys and their toys… you really don’t need this many screens…

Video Guide to Ascending & Descending Triangles

Below, a good and simple 2m:35s introductory technical analysis video to triangle patterns from IG:

How Important is the Closing Price of a Candle when Trading?

Reading candlestick signals can be like reading the tea leaves…

If you’re still a newbie when it comes to technical analysis then here’s a useful 9min video that discusses the closing price of a market:

21 December 2017: Textbook Head and Shoulders Pattern Set-up

info It looks like we could have an interesting “Head and Shoulders” pattern for the Italy 40 index.

Even if you miss this move, this is still a good 5 minute introductory video to such a textbook bit of technical analysis.

See Textbook Head and Shoulders Pattern for the Italy 40?

18 October 2017: Textbook Death Cross Example

info EUR/USD has just shown a textbook death cross.

A ‘Death Cross’ is a pretty negative signal and happens when a 50-period moving average crosses below the 200-preiod moving average.

In this case it’s the 50-hour ma crossing below the 200-hour ma.

For spread bettors this is interesting because that’s a much shorter term signal than the 50-day ma crossing below the 200-day ma.

See EUR/USD Death Cross.

19 September 2017: Long-Term USD/JPY Triangle Signal

info There’s an interesting triangle pattern for USD/JPY.

No trade yet but it’s a good one to keep an eye on.

See USD/JPY triangle pattern.

3 August 2017: Textbook Technical Analysis Triangle Trade Set-Up

We’ve added a textbook technical analysis triangle trade set-up.

Technical Analysis and Spread Betting Charts

To help with technical analysis spread betting firms give clients access to charts e.g.:

Technical Analysis - Spread Betting Charts
Typical Default Chart

Many charts let you review historic data in different views and timeframes, eg:
  • Candlesticks, Bar, Line and Area.
  • Timeframes: you can set the timeframe to be in 1, 2, 3, 5, 10, 15 & 30 minute intervals, 1, 2 & 4 hour intervals as well as 1 day, 1 week and 1 month intervals.

Technical Analysis Example

Firms like Financial Spreads also offer some of the more advanced charting features such as
Spread Betting Price Alerts
Adding Alerts
  • Free ‘Back Testing’ tools
  • Free price alerts
  • Drawing features for Fibonacci time-zones, fans and arcs

Technical Analysis Charts

The following spread betting companies provide clients with access to charts.

Financial Spreads - Bonds and Interest Rates IG - Bonds and Interest Rates City Index - Bonds and Interest Rates ETX Capital - Bonds and Interest Rates
Candlestick Charts Candlestick Charts available with Financial Spreads? Candlestick Charts available with IG? Candlestick Charts available with City Index? Candlestick Charts available with ETX Capital?

Technical Analysis Indicators

Trend Indicators

You might have heard the term ‘trade with the trend’ in relation to trading. Those who use trend indicators believe the market has certain up and down trends which can be used to predict future prices.

One of the simplest technical indicators is the moving average. Many traders use 14 day or 28 day moving averages on which to base their trading decisions. They believe that if the price starts trading above average, chances are it will continue to do so for some time and vice versa. If it should drop below average it will most likely continue to drop for a while.

Momentum Indicators

This type of indicator aims to pick up when the market gains or loses momentum. They are often oscillating indicators, showing when the market is oversold or overbought. Examples include Stochastic Indicators and the RSI.

Volatility Indicators

Volatility indicators pick up changes in market volatility. This can, for example, be a sudden change in the average movement of the price during a specific time period. Examples include Bollinger Bands and the ATR (Average True Range).

Also see Volatility Index (VIX) chart and guide.

Volume Indicators

Volume indicators react to a sudden change in market volumes. If a price breakout is combined with high volumes, this is, for example, seen as a very bullish signal. Examples of volume indicators include the OBV and the Demand Index.

What is Technical Analysis?

You will find that there are a large number of variables that could determine the current price of a given market. Ultimately it depends on how much money investors are inclined to buy/sell it at.

Whether or not a specific commodities market, share or forex rate moves lower or higher will often depend upon the market’s sentiment towards an industry or company.

This suggests that if market optimism decreases, prices can dip. Then again, of course, growing confidence can often turn into rising price levels. Note that with derivates products like spread betting an investor can speculate on a market to drop.

Many speculators decide to use a blend of fundamental analysis and technical analysis when evaluating the markets.

A trader using solely technical analysis bases their viewpoint on indentifying price trends in historic data and as a result candlestick charts are normally very helpful.

Considering the fact that a number of candlestick charts enable you to examine market movements covering 30, 10, 5 and even 1 minute intervals then technical analysis often attracts short term traders and day traders.

The basic principle of technical analysis is that all the details about a given market are already built into any price trends.

As a consequence, there’s no requirement to cover the current financial news and market information etc due to the fact any such elements are, in theory, reflected in the current market level.

Then again, whilst this can be a fast and useful analysis, the principal drawback is the fact that this type of analysis is based solely on historic data. Just because a given share has been falling, that does not guarantee that it will continue to fall.

AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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Gold Poised to Breakout Out of Long-Term Trend?

[…] it looks like the metal is in a classic triangle that started over a year ago in July 2016. . Technical analysis theory suggests that if the metal breaks higher then expect a new decisive trend higher (and vice versa). […]