Sunday, September 4, 2011

What is Technical Analysis Really ?

Do you REALLY know what Technical Analysis is in an investment ?  It doesn't matter if you don't know a single thing about it or you have been using it to earn yourself into millionaires.  This is a simple game of 5 pictures to look at and then make your own decision what Technical Analysis is.  Are you ready ? 

Game of Rule : There is a RED line in each chart, its called Moving Average.  The GREEN bars are the prices of the investment vehicle.  Whenever green bars cross above red line, we BUY (long)  and whenever green bars cross below red line, we SELL (short).

Below 5 screens are showing EXACTLY the same investment vehicle, at exactly the same time and the lines mean exactly the same things.  The only difference is the X axis at the bottom.  They range from 1 minute to 1 day.  So in each of the chart below, one green bar of price would mean the price within that particular duration ie. 1 minute, 5 minutes etc.

If you follow up to here, now is the time to look at the graphs.  You should decide to buy or sell when you look into each graph.

1 bar = 1 minute

1 bar = 5 minutes

1 green bar = 1 hour

1 bar = 1 day

1 bar = 1 week

Did you get these ?
1 min : Sell Now
5 mins : Bought and Keep, Not Selling Yet
1 hour : Sold and Keep, Not Buy Back Yet
1 day : Sold, Not Buy Back Yet
1 week: Side Trend, Don't do anything.

( Sell = Short, Buy = Long for this game)

So, what should we do ?  Do we Buy or Sell at this particular instant ?


LCF said...

I use hourly sticks to detect signs earlier, whereas daily sticks are for looking at the probable supports and resistances over a period of 1y or more. 1min/5min sticks are probably useful for daytraders; weekly sticks are likely to slow to catch any trends.

Michael Tsen said...

great comment ! :)