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Technical analysis has become extensive in recent years. Technical analysis works 60 to 70% of the time, and this is because fundamental events (earnings reports, lawsuits, mergers or acquisitions and many more events) always trump any technical pattern. However, in the absence of fundamental events, which is 60% to 70% of the time, technical analysis works because traders don't have any other information to go by.
There are several categories of technical analysis - Price indicators, Support and Resistance levels, Momentum indicators, Volume indicators, Oscillators and Statistical price movement indicators. This is again an area where the KISS rule applies - Keep It Simple S-----. We cut through all the noise and show you some of the key indicators you should study and that's all you really need to make informed entry and exit decisions. Technical analysis is a self-fulfilling prophecy and gives deep insight into crowd behavior. The more people follow Technical analysis patterns, the more they are likely to take action in some sort of co-ordinated manner.
Hope you enjoy this comprehensive suite of 10 very important Technical analysis tools. You will undoubtedly prefer some over the others, and that's fine. The key is to use the correct type of indicator for the specific situation you're trying to analyze.
The analysis and practical application of these Technical analysis tools are demonstrated on a Live trading platform with several examples. In that regard, this is a very practical guide to understanding Technical analysis tools.
List of Technical analysis tools covered for Stocks and Options trading
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|Section 1: The Technical Analysis Toolset course|
Introduction and OverviewPreview
Support and Resistance are two of the most popular technical indicators. This video studies the psychology of Support and Resistance.
We use the S&P 500 Spyder ETF (SPY) 1 year chart. We identify strong support levels at the 110 level and study the battles being waged at that level. Support points represent battle areas, and even though buyers are expected to come in and buy at those support levels, it does not mean that the stock will go up from that point. It depends on the intensity of the battle that is waged at that level. If you wanted to buy a stock at a support point, you'd wait to see who won the battle - buyers or sellers, because it could go either way. Once the result is decisive, that's when you move in.
The MACD is a powerful Momentum indicator to be used best in longer term trades.
Use the MACD to stay in a winning tradeIdeal for swing trades for a few weeks. Learn how to use the best features of the MACD whether you trade Stocks or Options.
Master the proper application of Oscillator indicators to determine oversold or overbought conditions. Get entries and exit right. Oscillators can be a useful addition to your technical indicator arsenal. In this video, two of the more important Oscillators are analyzed in detail - the RSI and the PercentR.
Standard Deviation is widely used in the financial markets to study different price movement patterns, especially in the Options markets.
The statistical concept of Standard Deviation is widely used in the stock markets, and follows the principle of the bell curve of a normal distribution. In fact, this concept is applied in various contexts - understanding Volatility, Probability, and estimating ranges for stock price movements. In this video, we cover how standard deviations are represented on a trading platform and what their importance is. Although standard deviation calculations reflect past prices and does not predict future price moves, its always good to have an idea of how a particular stock moves.
Bollinger Bands are a very popular technical indicator that can signal reversal points. Bollinger Bands are based on Standard deviation parameters.
Bollinger bands are a Technical analysis tool that provides helpful information about stock price movements. Specifically, the bands can be configured to show if a stock has moved past its 2-standard deviation points. The statistical definition of 2 standard deviation moves tells us that such a move outside the bands is likely to happen only 5% of the time. In this video, we show you what a Bollinger band is, how it can be configured, and how to glean insights from Bollinger bands. Specifically, Bollinger bands can provide good signals for trend reversals.
Also called OBV, this is an important indicator that shows money flows in and out of stocks.
With Volume being such a key (and often under-utilized) parameter in the markets, one indicator stands out for a couple of specific uses - identifying Reversal points in a stock.
The indicator is the On-Balance Volume (OBV). To explain it simply, it tries to measure if money is coming into a stock or going out. It adds the current day's volume to the a running cumulative total if the day was up (which means there was more buying activity). And it subtracts a day's volume from the running total if it was a down day. By doing this, it adds a layer of analysis that combines price and volume in one indicator.
For the most part, the indicator simply confirms the price trend. Where it is most useful is when it shows a divergence from Price.
How to effectively use Fibonacci retracements to give you an edge on trade entries and exits. Fibonacci is not as complex as you thinkUse the most important features of Fibonacci. And learn to apply Fibonacci retracements for maximum profit potential.
Understanding how strong or weak the Market internals are can be crucial to positioning trades aligned with the markets. Study the "breadth" of the market. Position your trades based upon the internal strength of the markets. This Free video gives a roadmap of what to look for when it comes to market internals.
Volume is one of the most under-utilized indicators. Use the Volume Profile to identify support and resistance clusters. Volume can identify critical zonesIdentify support and resistance clusters. Put higher probability into your trade entries and exits
This video explores the Probability analysis tools on the Thinkorswim platform. This is especially important for Option sellers. Probability analysis goes to the heart of understanding how the markets work. In the Options market, probability analysis plays a big role if you assume the position of an Options seller. Bear in mind, you are the Insurance company when you're an Options seller, and the business model of insurance companies is deeply rooted in statistical and probability analysis. We take you behind the scenes on the Thinkorswim platform and show you some cool tools on the platform. Even if you're a Stock trader, this analysis will help you think about markets in a mathematical and statistical manner.
Technical Analysis Quiz
Knowledge. Strategy. Execution.
Hari Swaminathan is the founder of OptionTiger, a cutting-edge Options Mentoring company, and a full-circle educator in all areas of Financial Markets, Hari has developed several proprietary Intellectual Property "methods and approaches" around enhancing base case Options strategies (which favor the Market Makers) and turns that deficit into a massive EDGE on the trader's side.. Like building a powerful Strategy "for all Option Strategies".
Hari is self-taught in Options and actively trading these instruments for almost 10 years, mostly through trial and error. Trial and error in general, is an excellent method of learning, but applied in this context, trial and error CAN BE EXPENSIVE. My courseware focuses on this aspect mostly, so you can avoid losing money in the 1 to 2 years when you're learning. Yes, it does take that long, if not more. If the markets were indeed simple, you'd have everyone involved in it. Patience, Diligence, and Determination are what you need during this time.
Hari has a Bachelors degree in Engineering from India, and MBA's from Columbia University in NYC and London Business School in London UK.
More than ever, its become important for normal people to take charge of their financial situation, and truly understand how financial markets, and the various asset classes, trading nuances really work. Investing in the financial markets is no longer a HANDS-OFF ACTIVITY. There's no point blaming financial advisors after the fact. Now, it's become crucial for everyone to do "their OWN homework", so you can decide for yourself whether something is good or risky. This is of course easier said than done, and that's exactly where we come in.
My mission is to educate everyday people on the deep, strategic underpinnings of the stock markets, and exploit that knowledge with the use of OPTIONS. THERE IS NOTHING RANDOM about the markets. There are surprises all the time, but there's always a method behind every madness. And my goal is to get you to this point of understanding and awareness. That's when it starts to fit in.
Knowledge, Education, Crafting Breakthrough strategy, Technical analysis, Following Smart Money, Risk management, Disciplined Money management, and near flawless Execution approaches are just a few of the crucial points emphasized in all the Courses. Video-based education courseware, Practical workshops, several elite proprietary Advanced systems, a 4-week Live Mentoring program are just a few things we offer. The goal is to provide a "full circle" education in the Markets, which is necessary before it starts "fitting in".
Let's break down the Options game in a realistic manner.
1. Options were invented out of thin air. And the people who invented them won Nobel Prizes for their invention (Fisher and Black). It is purely a "Mathematical" concept, with no real connections to the external world except for one, that's defined implicitly in its design.. Its fascinating, mathematical, strategic, risky, but can also provide the basis for life-long income streams. There's focus on Analysis, Data science, Statistical Modeling and Probability theory.
2. This gives rise to very complex but interesting analytical scenarios. It also gives us the ability to model Options with a set of tools like a car dashboard. In many cases, you don't need to see what's going in the Markets, or the Stocks themselves. This data is embedded in the mathematical formulas that underpin Options structure itself, and you can operate on the basis of your Dashboard.
3. Because everything in Options is defined in mathematical terms, its also important to realize that OPTIONS will always be the same. The math behind Options will always be the same. Forever. Unless they discover serious flaws in the formulas and models used by these Nobel winners. And of course, sadly, if it were the case, the Nobel prizes would have to be retracted and we go back to the drawing board again. But today, several well developed markets around the world exist purely based on their Mathematical Modeling of RISK.
4. Options and Chess have LARGE overlaps. You may agree that Chess is a game of "skill". It's a game of Strategy and depends upon how well you can plan (ahead) to attack, defend or take a neutral position. We also believe that Chess is strategy-focused and depends upon certain mathematical principles. Why or How do we know this - The reason we know its a game of skill is : Try to play 100 chess games with Kasparov or Anand. Normal people are almost guaranteed a loss in all 100 games. So it has to be a game of skill. And why do we know its underlying features are mathematics based. The fact that a computer like Deep Blue beat the GrandMaster Garry Kasparov in 1997, proved to be both shocking, and revealing at the same time. While human beings abilities have not increased in exponential terms during the last 20 years, and we may be able to plan 3 or 4 or 5 moves ahead, the computer of today can calculate a 1000 moves ahead, go down every possible path, and record the outcomes like photographic memory. This is a capability that humans may never achieve, proving that Math plays a key role. So today, every professional Chess player refuses to play the machine, because it's almost guaranteed that the Masters WILL LOSE EVERY GAME.
5. Lastly, You MUST believe this completely - Options, just like Chess, are a "skill set", and requires acquiring a deep set of analytical skills much more so than most skill sets in the world, and THEY can only be MASTERED over a period of time. Once you understand Options better, you'll realize how true this is. We cannot turn into a Kasparov in a matter of weeks or even a few months. It does NOT work like that. But once you go through this process that can go for 1 to 2 years or more (depending upon your commitment to this process), there is a very powerful light at the end of this tunnel. You build a skill set for life. Age, Geographical location, Lifestyles, or Weather are no longer a barrier to creating consistent income streams, regardless of who you are, where you are, or how old you are.
This is very POWERFUL stuff.
Now let's look at the negatives. This is what most people will NOT tell you. Anyone that tells you Options are SIMPLE, and you can make extra ordinary income easily, is JUST NOT TRUE. I will tell you Options can be brutal if you simply apply speculative methodologies. Then you should just STICK TO STOCKS, which are nothing BUT speculation, with a minute role in STRATEGY Give yourself time to master this CRAFT. And once you can develop a SYSTEMATIC approach to every situation (which is the Real Game), you'll be well on your way to consistent performance.
Options are easily the most fascinating financial instrument with several upside benefits, but also an equally powerful set of negatives.
1. Options have a steep learning curve. Don't expect to become Kasparov in a couple of months. Or even a year or two. And why is this important to realize: Because we are playing a Kasparov or Anand every time we enter the Options market. Market Makers who are 99% of the time, the counter party to all Options trades, are Options professionals, with 10 to 20 years of experience, in performing their "legal duty" of providing liquidity. While we have hours to plan our attack, the Market Maker literally has a few seconds. In a normal day, a market maker can do many thousands of trades. One can only be in awe of their skills.
2. If you're interested in Options, try NOT approach it with a mindset or requirement of making money. This is not only NOT going to happen, but its a recipe for disaster. It's like a student of Medicine wanting to practice their skills after 2 months of study. To develop a meaningful batting average, you will need Time, Patience, and Perseverance. They don't develop overnight. Focus completely on the learning, ideally practicing on paper money accounts because you WILL LOSE at first.
3) As someone that has self-learnt Options and through making mistakes from Trial and Error, I can tell you Options trading is not something you should take lightly. You will hear people talking of fantastic triple and quadruple digit returns. I'm here to be brutally honest with you -
- Be very very careful in the first 12 months of Options trading.
- This is when everyone is the most vulnerable to losing money.
- Your main objective during this time is to focus on learning this craft and NOT lose (too much) money
Having said that, if you can get past the first 12 months and acquire the expertise in a Systematic manner with Systematic approaches to every situation, true financial independence awaits.
You can trade Options from anywhere in the world, regardless of how old you are. You never have to worry about job security any more because you have a skill that can produce consistent income month after month.
But you have some serious but exciting work to do before you get there, and I'm here to help you in this journey.
Watch my Free Mini-courses or my YouTube channel , all of which have the highest quality education in Options as well as Financial Markets..
And join me in my UDemy courses, where I share cutting-edge theoretical knowledge mixed with practical insights, strategy and impeccable execution approaches, through live trading examples. How do we know it's all this (don't just go by my word). Check what 25,000 students have to say in 2100 Reviews, with almost 2000 of them being 5-Star or 4-Star
If you have any questions at any time, please feel free to message me on Udemy.
The order to follow on my Udemy courses
Comprehensive guide to Financial Markets, Investing and Trading
Options Trading Beginners Bundle (3-course Bundle)
Advanced Options Concepts
Options spreads and credit spreads Bundle
Technical analysis and Chart reading Bundle
After this, the order does not matter. You can take any of the courses as per your interest.