Understanding Technical Analysis

FinanceTrading / Investing

  • Author Jason Stapleton
  • Published April 19, 2012
  • Word count 535

How can an understanding of technical analysis help me become more profitable; perhaps even profitable for the first time? Is it really possible for someone like me to acquire the fundamentals of technical analysis? Does it really work? What is it exactly and can it make me profitable? I remember asking those questions myself and the answer to all those questions is a resounding yes.

So what is technical analysis really? I hear you speak about Gartley’s, AB=CD, Bat and Crab patterns, support and resistance. It quite frankly can seem a bit overwhelming.  First and foremost I want to tell you that technical analysis is a learnable skill. And as with all the other skills that we each possesses it does require the ability to learn, then a commitment to put into practice what you have learned.  Think about this: From our earliest years of life we have all traveled a similar path, we watched as our caregivers repeated certain actions.

After a bit of this we then tried to imitate their actions, received more instruction and so on and so on the process of learning continues at each step we grow in both skill and confidence until you are proficient. Whether it is the first time you held a spoon or a glass of water, driving your first car, or doing the laundry (I am still practicing on that one) it is how we as human beings learn. Practice may make you proficient.

Perfect practice makes perfect. With that in mind we as adults we have a big advantage over our children and that is the ability to ask questions, all the while accumulating more and more information retaining it then repeating the same action over and over until it literally becomes second nature to us. We respond to what we see without almost without thinking.

Those of us who have been driving for year or more know instinctively what to when the stop sign is ahead. We don’t think about what to do, our foot automatically comes off the accelerator and onto the brake. It is completely instinctive and an unconscious act. Most of us don’t require someone telling us what to do when we’re behind the wheel (nah, not going there) because we have driven so many times in the past that it doesn’t require much effort on our parts. You can achieve this sort of skill and confidence in your trading as well.

I started this with a basic question and now your diligence will be rewarded.

Technical Analysis is simply the study of previous price action as it appears on your chart.  People far smarter than me have found that this price action produces recurring patterns that appear in every timeframe and chart type. Candle sticks, range bars and whatever your charting package provides. It really doesn’t matter. Structure leaves clues. These patterns occur, they are frequent, and they can give us a statistically viable and predictive edge.

Maybe now it’s time to ask yourself a question.  How much would my trading improve if I knew more about technical analysis and that a type of Gartley or Bat pattern was over 60% accurate?

Want to understand trading how to? Forex Market Preview reveals the secrets you need to be a successful currency trader. Jason Stapleton is a master trader and will help with the trading psychology and ratio analysis that will help make you not only profitable but consistently profitable.

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