Opening the Technical Analysis Toolbox
In This Chapter
Defining technical analysis
Getting acquainted with the trend
Figuring out your definition of trendedness
Getting the many names for technical analysis straight
Beginning your technical analysis journey
Welcome to technical analysis, which may be a new way of looking at stocks and other securities for you. Simply put, technical analysis is a set of forecasting methods that can help you make better trading decisions.
In this chapter, I take you on a quick tour of key technical concepts and review why technical analysis works (and why sometimes it doesn’t). You may think that technical analysis is all about reading charts full of squiggles and lines, and although I give you plenty of material about squiggles and lines in this book, technical analysis is also about managing market risk.
Does that sound a bit too grand? Well, building a house isn’t chiefly about hammers and nails, although you need them. Squiggles and lines are just tools. Think of tackling technical analysis as a project to build better trading practices. Yes, you need the squiggles and lines, but your goal is to use those tools to make money.
Introducing Technical Analysis