Basics of Investing Using Technical Analysis

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Stock Charting & Technical analysis are critical tools that can save you money when making investing decisions. But these powerful techniques can be hard to understand. This presentation explains the basics.

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  • Basics of Investing Using Technical Analysis

    1. 1. LEARN THE BASICS OF STOCK CHARTS & TECHNICAL ANALYSIS FOR INVESTING by Matthew Formica, CEO, MF Software http://www.mfsoftwareonline.com
    2. 2. AGENDA• What is Technical Analysis?• What are Candlestick Charts?• Simple Moving Averages, Support, & Resistance• RSI Indicator• MACD Indicator• Final Thoughts
    3. 3. BUT FIRST...• What is MF Software? We’re a small software company specializing in mobile Finance apps for iOS.• Our Stock TickerPicker app lets you do powerful stock charting on- the-go.• iStockpicks helps automate the analysis.• RateWatch gives you broader economic data.• Check us out online or email at mformica@mfsoftwareonline.com!
    4. 4. WHAT IS TECHNICAL ANALYSIS?• Technical analysis is the evaluation of a stock’s price movements over time, looking for patterns of past movement that can help indicate future price movements.• It involves looking at a stock chart and various indicators designed to help show a stock’s momentum and tendencies• Technical analysis is the opposite of fundamental analysis, where the company underlying a stock is evaluated on its fundamentals - cash flow, profits, etc. • Both styles of analysis have their place, and once you pick a stock for fundamental reasons you can use technical analysis to evaluate when the right time to buy in is.
    5. 5. WHAT ARECANDLESTICK CHARTS? Candlestick charting was invented by the Japanese around 1850 for trading rice.Candlestick charts get their name from their visual representation of stock price movements, which look sort-of like candlesticks. Candlestick charts, unlike mere pricemovement charts, contain lots of info for agiven time period (5 minute, 30 minute ordaily): the open, high, low, and closing price during that time period.
    6. 6. CANDLESTICK high close CHARTSCONTINUED... open lowIf a stock closes the period higher than its open, the candlestick body ishollow, the “lower shadow” is the low high of the period, the bottom of the “body” is the open, top of body is close and open the top of the “wick” is the high. If the stock closes lower than its open, the candlestick is filled. close low
    7. 7. SIMPLE MOVING AVERAGES• A Simple Moving Average (SMA) is a rolling period average of the stock’s price movements over a period of time (20-day, 50-day and 200-day SMAs are common). This is charted on the stock chart as a line. SMAs often represent support and resistance points, the key concepts of technical analysis.• Support is a stock price at which enough buyers will step in that the price will no longer keep falling.• Resistance is a stock price at which enough sellers will step in that the price will no longer keep rising.
    8. 8. RSI INDICATOR• Measures the speed and change of price movements over a period of time, typically 14 days• Ranges from 0-100, where 100 is sustained/large gains and 0 is sustained/large losses• RSI readings less than 30 indicate the stock is oversold and you should look for an entry point.• RSI readings greater than 70 indicate the stock is overbought and you should look for an exit point.
    9. 9. MACD INDICATOR• Uses two moving averages together to create a momentum oscillator, which fluctuates above/below the zero line (the point where the two moving averages are equal)• A “signal line” 9-day exponential moving average is also used• Crossovers, when the MACD line crosses above/below the signal line or the zero line, indicate bearish or bullish signals
    10. 10. FINAL THOUGHTS• Thank you for your time. Hopefully this has proven helpful.• Now that you know a little about technical analysis, why don’t you stop by our blog to learn more?• Have an iOS device? Buy Stock TickerPicker to do powerful investing analysis on-the-go for iPhone & iPad! The money you save from using technical analysis will more than pay for the app almost immediately.• Questions? Email me at mformica@mfsoftwareonline.com

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