How do I learn technical analysis? Technical analysis is the study of market data formatted in various ways. It provides traders insights into future probable price moves. Generally it provides a trader or investor a visual representation of market behavior. It is an invaluable tool in the process of making investing and trading decisions.
To learn technical analysis one really needs to study some of its history. The earliest information begins in eighteenth century Japan and was reportedly used to trade the Osaka rice market in Japan by Muanehisa Homma. Evidently he was one of the first to format price data into a graphic representation. Many will recognize the phrase Japanese Candle Stick Chart. That was his baby. It is a more advanced representation of price action than the standard bar chart that we use more commonly today.
While there has been much information about market price behavior published since then, is probably the book by John Murphy; “Technical Analysis – of the Futures Markets”. This thick book should probably be the go to reference on how to learn technical analysis.
Understand Technical Analysis
To define technical analysis it is incredibly important that one understand that the chart or indicator is not the market; it is a representation of the market in a graphical format. All the trend lines, oscillators, moving averages etc. are analytical representations of what is called the market. However, markets themselves seem to take on a living, breathing almost human life of their own. This can’t be accurately predicted by mathematical formulas, but probabilities can predict likely outcomes. In the same vein we can learn technical analysis to manage risk. However, we can’t use it to determine exactly what the market will do. It is the propose of the Commodity Trading Basics to teach that concept.