Stock Indices Technical Analysis is Based on 3 Factors Common in the Stock Indices Market:
1. Stock Indices Price Moves in Trends
Stock index price movements follow trends. This means that after a stock indices trend has been established, the future stock index market price movement is more likely to be in the same direction as a stock indices trend than to be against it. Most stock indices strategies are based on this stock indices technical analysis concept - stock indices trend trading.
2. Stock Indices Price Movement Discounts Everything
Stock index technical analysis only considers stock index price movement and assumes that, at any given time, stock index price reflects everything that has or could affect the stock indices trading instrument including even the fundamental factors. This only leaves the study of stock index price, which is a product of the supply and demand for a particular stock indices instrument in the stock index trading market.
3. History Tends to Repeat Itself
History repeats itself mainly in terms of stock index price movement. Repetitive nature of stock indices market movements is attributed to stock indices traders investor psychology; in other words, stock index trading participants tend to provide a consistent reaction to the stock indices market most of the time. Stock index technical analysis uses stock indices chart patterns to analyze these stock index price movements. Although these stock indices charts represent historical data they are still relevant because they illustrate stock indices chart patterns that often repeat themselves.
Understanding this stock indices technical analysis of the stock index trading market can be a valuable stock indices tool in determining the stock indices trend of any stock indices market and assisting with entry and exit levels for your stock index trades.
The goal of these stock indices technical analysis methods is to help stock indices traders determine when the stock indices market is trending, & when it isn't. If the stock indices instrument is moving in one particular direction, then we want to be on board. If the stock indices trading instrument is not moving in a particular direction, all you are going to do is lose money as you will get whipsawed around and this is not what we want as stock indices investors.
Unfortunately, many traders fight the stock indices trend and buy or sell in the opposite direction of a this stock indices trend direction, trying to pick a top or a stock indices market bottom, only to see the stock indices market move further in the direction of the trend.
Another common mistake stock indices traders often make is adding onto a losing stock indices position, averaging a loss. This is not a good stock indices strategy especially in a strongly trending stock indices trading market. It is something that experienced investors never do. The stock indices trend is your friend, never go against it.
This stock indices technical analysis studies alert investors of stock indices setups and there are no certainties in financial stock indices trading market. Profits come from using proven stock indices strategies & stock indices methods to find a trending stock index and taking stock index trades in the same direction of the trend.
With so many stock indices investors using similar stock indices tools, stock indices technical analysis can become a self fulfilling prophecy. If many stock indices investors use the same levels as a buying point, the stock index price goes up as everyone will make similar stock indices technical analysis moves. However, the question is always how long these stock indices moves will last?
Understanding this stock indices technical analysis methods will give the stock index charts some meaning when you look at them and apply stock indices technical analysis. Stock index technical analysis will help you understand why certain stock index price movements occurred.
Stock index charts are used with indices indicators to look for stock indices chart patterns that have occurred in past under certain conditions. When these conditions are noted again, you can use the past stock indices chart patterns studies to make a buy or sell decision.
Some of the most common stock indices technical indicators include: Stock Indices Technical Analysis Explained PDF
- Moving Averages Technical Indicator
- RSI Technical Indicator
- Stochastic Oscillator Indicator
- MACD Indicator
- Fibonacci Retracement Indicator
- Bollinger Bands Indicator
Most stock indices technical indicators are shown separately from the stock index chart usually below it. This is because these indicators often use a different scale than that of the stock index price chart.
Some of the technical indicators are shown on the stock index price chart itself, such as Moving Averages and Bollinger bands - these indicators are referred to as stock index price overlays.
Explanation of these indicators is found under the tutorial: List of All Stock Index Indicators - Learn Stock Indices Technical Analysis Course
SUMMARY
- Stock Indices Technical Analysis Relies on Defining Probabilities
- Stock Indices Technical Analysis Uses History of Indices Price Patterns
- Stock Indices Technical Analysis Uses Several Analytical Tools (Stock Indices Indicators)
- Stock Indices Technical Analysis Uses Stock Index Chart Patterns
Indices Technical Analysis Examples
Most stock indices traders prefer technical analysis - learning the stock indices technical analysis methods also takes time to learn due to its nature which involves abiding by the stock indices technical rules.
To learn how to trade stock indices successfully, it is important that you understand the 3 strategies, outlined below:
1. Indices Trading moves will always follow a stock indices trend which can be identified by looking at the stock index chart patterns or the candlesticks charts. If any stock indices investor tells you that you can also profit from the counter-trends consistently it will not be possible because the stock indices trend is the only proven method of making money in the stock index trading market.
2. The market forces will drive the stock indices instrument stock index prices up or down depending on supply and demand. Stock index technical analysis seeks to measure the demand supply of a stock indices trading instrument using various stock indices technical analysis tools and stock indices indicators. The demand supply is reflected in the stock index price action. Therefore, by simply looking at the stock index price movements themselves you can try and predict what direction the stock index price is likely to move towards using one or two stock indices technical indicators - stock indices technical analysis indicators like the moving average or support and resistance levels stock index technical indicators.
3. The stock indices market not only shows the history of the past stock index prices, but will also follow the stock indices trend that was in place, until its stock indices trend direction reverses. Some very important stock indices indicators used to determine these stock indices market movements are Moving Averages, MACD and Bollinger Bands Stock Index Indicators.
When index price starts to consolidate, which means there is no stock indices trend, you should use a different approach to analyze the stock indices trading market. You should use support and resistance levels and breakout stock indices strategies to analyze the ranging stock indices market stock index prices.
When the stock indices market retraces, you should use stock indices patterns & stock indices technical indicators to analyze whether the current stock indices trend will continue or reverse.
