Chapter 1. --- Technical Analysis

" Even a Thousand Mile Journey Begins with the First Step "

Technical Analysis is the study of market using the past price to learn about human psychology in the market and forecast the future price movement and trends. Martin J.Pring stated that “ technical analysis is the art of identifying trend reversal at a relatively early stage and riding on that trend until weight of evidence show or prove that the trend has reversed’ .

Technical analysis is believed by traders since years , will influence the market price such as fundamental events, natural disasters, and psychological factors are quickly discounted in market activity. In other words, all of these factors will show up in some form of price movement. This technical chart is simply a short-cut form of fundamental analysis. The most important thing about technical analysis is “ Technical analysis deal with probabilities not certainties “, many facts that what we learned are not actually true and what wee seems to be obvious sometimes is not. But, using technical analysis will increase your understanding of the market and give you a new dimension to your trading style, so you can trade with smart and patience.

There is a usefull book titled “ The fountain of gold – the three monkeys record of money” written by homma at 1755, the author stated that “ when all are bearish there is a cause for the price to rice, when everyone is bullish there is cause for price to fall”. There are some good statements of this book that I found at Steve Nison`s book – “ Beyond Candlestick ” , that we can use it for furnishing our trading style, which are :

1. “See no evil “ when you see a bullish or bearish trend , don`t get caught up in it, consider it an opportunity to sell or buy.

2. “ Hear no evil “ When you hear about bullish or bearish news, don`t trade on it. It will be safer for trader to trade after you determine how the market react to a news rather than initiating a trade when the news is released.

3. “ Speak no evil “, don`t speak to other about what are you going in the market “, you will get confused, why i should not tell anyone about my trading plan? The answer is when you tell anyone about your plan to buy or sell in the market and that person said something negative about your decision. You will get confused and then decide not to buy or sell. When you study and learn about the market and have decision on it. It is better don`t tell anyone except that person have better insight than you.

In this chapter i will discuss about :

A. Technical vs Fundamental analysis

B. Type Of Charts

C. Support and Resistance

D. All About Trend

E. Volume and Open interest

F. GAPS