Using Technical Analysis to Detect
Trends and Patterns

The other major principal on which technical analysis is based is that the
trends repeat themselves. Trends or patterns appear time after time on
charts and graphs. These patterns can be interpreted and used to make
educated predictions as to the future movement of the stocks price.

Although your track record on making predictions based on this system
won't be perfect, the odds will be in your favor most of the time. Trends
tend to repeat themselves because human nature is such that people
tend to act in the future, just as they have in the past.

By studying the actions and behavior of people in the past, technicians
can determine how people will react under certain conditions that occur
in the current market. This behavior determines stock price movements.
This information can be used to identify market tops and bottoms.

The great thing about technical analysis is that it can be applied very
effectively to just about any trading situation or time horizon. You can
analyze stocks, bonds, options, commodities, mutual funds, and many
other investment opportunities.

Plus, you can make tic-by-tic (real-time) trades, intra-day, daily, weekly, or
monthly trades.

The best way to use technical analysis depends on your investment
philosophy and your approach to the market. Everyone's risk tolerance is
different. Taking on a lot of risk can raise your stress level and get on
your nerves. You need to evaluate your strengths and weaknesses.

If you're in to high-tech wiz-bang software and computer applications, I'd
say that you'll love technical analysis.

This is just a small sample of the terminology and subjects covered:

Starting with: Bar chats, volume charts, reversal chart patterns, spikes,
gaps, head and shoulders tops and bottoms, ascending and descending
triangles, flags, island reversals, trend channels, speed resistance lines,
moving averages, envelopes, oscillators, relative strength analysis, open
interest, divergence analysis, stochastics, candlesticks, point and figure
charting, extreme readings, the Dow Theory, and much more.