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# Strengthening Your Comprehension On Technical Analysis Tools by Tushar2012

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I personally support the assumption that an adequate comprehension of technical analysis can lead to higher trading or investment success. The method is commonly applied to forecast future price trends through the process of evaluating historical market action. Every market participant should familiarize themselves with valuable technical analysis tools and concepts if they want to strengthen their capability in applying the method in their trades and investments.

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```									I personally support the assumption that an adequate comprehension of technical analysis can lead to
higher trading or investment success. The method is commonly applied to forecast future price trends
through the process of evaluating historical market action. Every market participant should familiarize
themselves with valuable technical analysis tools and concepts if they want to strengthen their
capability in applying the method in their trades and investments.

Below are the essential technical analysis tools that we need to familiarize ourselves with:

Trends

They refer to the path the price is going. The steepness of the existing trend is determined by the "rising
peaks and troughs" and the "falling peaks and troughs". A trend reversal is usually indicated by a trend
break. A trading range is distinguished by "horizontal peaks and troughs".

Waves

This is explained by the Elliot wave theory. It is a type of market analysis that is based on the Fibonacci
number sequence and the recurring wave patterns. Appealing Eliot wave patterns display a five-wave
advance then afterwards a three wave decline.

Number Assumption

The Fibonacci number sequence (1, 1, 2, 3, 5, 8, 13, 21... ) is created by adding the first two numbers to
acquire the third. A well-known Fibonacci retracement number is 62% in which is derived from the ratio
of any number to the next bigger number.

Stochastic Oscillator

Stochastic Oscillator is one of the technical analysis tools used to determine the oversold/overbought
status usually on a range of 0-100%. This indicator is supported by the observation on strong up trend in
which period closing prices will usually focus in the upper part of the period's range. The two lines (%K
and %D) that stochastic calculations produce are valuable indicators of oversold/overbought areas on a
chart. The variance between the underlying instruments' price action and stochastic lines emits a strong

Gaps

These are areas seen on the bar chart in which no trading has transpired. An up gap is a sign of market
stability in which is usually formed when the cheapest price on a trading day is larger than the previous
trading day's highest price. Conversely, the down gap is a sign of market vulnerability in which it is
formed when the largest price of current trading day is lower than the previous day's cheapest price.

Breakaway gaps signify the start of a significant price change. A runaway gap happens around the
middle of a significant trend in the market. An exhaustion gap is a sign of a trend's coming conclusion.

Gann Numbers

This assumption explains the significance of using the angles in the charts to identify the resistance and
support areas as well as forecast when the changes of coming trends will occur. In addition, it uses the
charts' lines to forecast resistance and support areas.

Moving Average Convergence Divergence or MACD

It is a display that involves the plotting of two momentum lines namely the MACD line and signal or
trigger line. You will find the difference between two exponential moving averages in the MACD line
while the exponential moving average of the difference is seen in signal or trigger line. The intersection
of the MACD and trigger lines can signify a high probability change in trend.

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