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Volume Charts Technical Analysis

About Technical Analysis


In general about technical analysis and role of the volume in it.

In many references, you may find "Technical analysis" defined as a study of price movements for the purpose of predicting trend development. In reality, it would be correct to say that technical analysis is the study of the movements of a stock/index or any other financial commodity for the purpose of predicting the future trend direction. This is a study which is based on the analysis of the current prices and volumes, comparing them to historic prices and volumes and looking for similarities that may help to define possible future trend development.

As you know, the movement of a stock/index or other commodity is always described by the change in price, trading volume during this price change and change in volatility. In addition, an index movement is described by the number of advance/decline stocks and by advancing and declining volumes. It would be wrong to state that technical analysis is an art of price analysis only and be focused only on price. By looking solely at price, a trader's vision is limited and he or she will be unable to see the basics processes that describe the cause of the price movement. That is why price, volume, volatility and advance/decline data must be analyzed in harmony. Only a complete analysis of the movement of a stock/index can provides the complete picture of this movement and can be considered to be an appropriate source for making a trading decision.

In technical analysis you always compare current action to history. Even when you do not think about that, your trading decision is based on the analysis of history. If you trade an MACD histogram on its crossovers with zero line, you do it because as a result of the history analysis, you know that this is a good entry/exit point. Even if you do not analyze history literally, indirectly, you always use the historical research results of professional analysts who have developed technical indicators.

You should always look at the history to check what indicator settings work best. Below are a few Technical Analysis Tips that can help in starting your own analysis:

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