| Tutorial about Technical Analysis |
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JBendar
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| Tutorial about Technical Analysis |
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Hi Everyone:
Since I have been involved in trading and investing in the stock market, I would like to share with the newcomers some points about technical analysis. Technical analysis is the study of price movements of stocks, bonds, futures, commodities, options, etc. The normal way to study price movements is to plot the closing prices from day to day. This is called a moving average. Moving averages are normally studied in the ranges of 10 days, 20 days, 40 days, 50 days or 200 days (could be minutes, hours, etc, instead of days). When the price of what you are trading crosses higher than the moving average, that is a good thing. If it stays above the moving average it is even better. I am not going into great detail about the points referred to here, because there are volumes of articles, books,etc. on the topic. The next thing I want to review is support and resistance. Support is the lowest price where buyers become interested in buying (demand). Resistance is the highest price where either buyers do not want to buy any more or sellers start to sell (supply). Prices fluctuate based on the struggle between buyers and sellers. If you want to learn about technical analysis in detail there are two experts in the field. John Murphy and Martin Pring. John Murphy was a Technical Analyst for FNN (now CNBC). Martin Pring gives lectures and seminars all over the world and has his own web site www.pring.com if you want more information. For those of you who are experienced traders, my apologies for boring you. Thank you for those who were able to pick up something here.
JBendar 
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Sun Mar 12, 2006 2:38 am |
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Rolo
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I have John Murphy's volume right here, but haven't read it yet (TIME!?!).
One thing I never found in much reading: why is 50-day MA the 'standard'? Why ten weeks? Why not 13?
"Expect me when you see me."
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Sun Mar 12, 2006 5:29 am |
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JBendar
Senior Member
Cash: $ 49.60
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| Technical Analysis |
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Rolo and Sarah:
It is my opinion that John Murphy uses the 50 day and 200 day moving averages because he is comfortable with using them. If you read other books, there will be other averages mentioned. Oliver Velez uses 20 and 40 day moving averages in his "Swing Trading" seminars. Other experts use different measures. You have to test what time frame is beneficial to your particular style of trading. Some people use simple moving averages, while others use exponential moving averages. The exponential moving averages are used to smooth out the predictions. It is too complicated for me to understand. There is a method of trading called KISS (Keep It Simple Stupid). I didn't start this, but read about it somewhere. The less complicated your technical analysis is, the more focused you can be on your main plan - to make money.
Joel
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Mon Mar 13, 2006 8:45 pm |
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Rolo
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| Re: Technical Analysis |
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quote:
Originally posted by JBendar
It is my opinion that John Murphy uses the 50 day and 200 day moving averages because he is comfortable with using them.
Not just Murphy....my question is....why are the 50-day and 200-day MA's sooooooo popular? Why those increments?
And don't answer with "Why not?" oy.
"Expect me when you see me."
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Mon Mar 13, 2006 9:39 pm |
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JBendar
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| Technical Analysis |
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Tim:
Your points are well taken. I should leave the explanation of technical analyis to the experts. It is just that technical analyis has been an area that is interesting and enjoyable to me. There are diverse opinions on the validity of moving averages. There are experts that feel price and volume are the only things to follow in making intelligent investment decisions. Other experts say that there should be a combination of many things (price,volume, moving averages, oscillators, etc.) I try to attend as many online seminars as I can because these are given by the people with trading backgrounds for many years. Examples of these experts are David Nassar, Toni Turner, Oliver Velez, John Person, John Carter, etc. If anyone needs the web address for these individuals, you can respond to this thread.
Joel
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Tue Mar 14, 2006 1:37 am |
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JBendar
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| Technical Analysis |
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Rolo:
In reply to your question about 50 day moving average, I could not find an answer. There were notes taken from a seminar sponsored by Charles Schwab. The presenter was Ken Tower - Schwab's Chief Market Strategist. The only thing Tower mentions in his presentation is 21 day moving averages and 63 day moving averages. The reason for picking these numbers is that there are 21 trading days in a month, and 63 trading days in a quarter. There must be a logical explantion for the other time frames, such as 50 days and 200 days, but I can't find it at this point. If anyone else can explain this, it would be helpful to all of us.
Joel
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Tue Mar 14, 2006 2:09 am |
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JBendar
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| Tutorial about Technical Analysis |
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Hi Everyone:
In reading Toni Turner's new book, the solution was given as to why 50 day and 200 day moving averages are used. It seems that there are approximately 250 trading days in a year. The financial institutions use the 200 day figure because it is easier to work with. If you take the 200 day average and divide it by 4, the answer is 50. Even though the actual number of trading days in a quarter is closer to 63, the number 50 is used for convenience. The 100 day moving average is the measure for six months. Hope this clarifies what you were asking.
JBendar
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Tue Mar 14, 2006 4:00 pm |
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