Introduction to Technical Analysis for Beginners

hello everyone this is charting mandan of the chart guys dot-com and in this video we're going to be going over an introduction to technical analysis and it's going to be designed for those of us who are just dipping their toes into the vast world of charts and technical analysis and every single trader that utilizes technical analysis at one point in time was very brand new to everything and everything seemed overwhelming we know there is tons of information out there on the internet which should certainly be utilized but it's important that we stay organized and don't get overwhelmed and be able to direct our focus and our education to learn what is most important and then be able to apply it in the real world to become more profitable traders and investors so what we're going to be going over today is the lesson outline here the basic chart elements what we are looking at when we see all those candlesticks shapes and all the lines on the chart we've got volume we're going to look at because that's important for knowing how much dollar volume is being traded and volume basically is just the amount of shares going back and forth but there's lots of information that you can gather from that volume data moving averages what they are and how they can be used in your trading game plans trends just the basic overall what makes an uptrend at what makes a downtrend and even if you're not going to be a full-time trader and even if you're not going to trade often being a long-term investor knowing trends is very important and that's why I think it's essential for pretty much everybody that has anything to do with this market needs i'd say at least a basic bare minimum of a dozen hours of Education to be able to look at a chart and no my stocks my long-term picture an uptrend or they're in a downtrend and I should get out of these positions and find stocks that are in a bullish long-term uptrend next we'll look at indicators and these are tools that traders have in their tool belt the RSI and some other things that make trading a little bit easier in terms of giving us other information overbought and oversold conditions and then we'll look at Candlestick psychology because that's what charting is it is plotting emotion human emotion and psychology in a pictorial form here on a chart and being able to utilize that information to stay one step ahead of the herd so to speak and I refer to be heard as basic retail traders who are behind the curve a bit so to speak without using technical analysis so let's get right into it and look at basic chart elements so before we get into the basic candlestick representation of what we're looking at on a chart i want to get into what I find very interesting here and it's the history of Japanese technical analysis candlestick trading it originated back in japan in the 1600 and the fact that we are using this information in this trading style 400-plus years later I find that extremely fascinated and the reason that that does work is due to the consistency of human emotion and again that's what's depicted on these charts and being able to capitalize on exuberance and traders over-exuberance we're going to the upside and greed and being able to capitalize on fear and panic is definitely what these charts are trying to represent to us and like I said that human emotion does not change through time certainly hasn't in the past 400 years that worked back then and it certainly worked now as you will see if you keep diving into technical analysis and sticking with it with motivated educational game plans you will first certainly find for yourself that it is more useful to utilize this information that it would be to completely ignore it so the birth of technical analysis back at this time period you'll find a lot of the terminology in these technical analysis candlesticks the names of the candlesticks and it's a lot related to war and that's due to the culture at the time it was a samurai based culture and B there's a lot of war strategy and its really looked at trading as a battle plan so to speak and it was utilized most in the rice market there was a man named homina and he was known as the god of the market he dominated the trading industry because he developed and utilize he was one of the developers of technical analysis and being able to see the chart and the trading action visually certainly gave him a step up on the competition and it showed by the amount of wealth that he was able to amass so we used in japan for hundreds of years it didn't wake make its way to the US market until about the 1970 so all in all it's fairly new to the US markets 40 years certainly seems like a long time but when you're talking 400 years back in Japan you can see that we're a bit behind the game you're in the US but you can see that it is certainly catching on a lot of traders are utilizing it and it's becoming more and more popular as more and more people see the benefits of this trading style so let's look now at what a chart basic chart is and what these candlesticks represent so this is known as the real body of a candlestick and it's the solid part and then you have the wick the upper wick and then the lower wick and the lower wick is sometimes referred to as a tail but what it tells us when the candlestick is green and the color of these candlesticks is important but when it's green we have the open of the day if you're looking at the daily chart the candlesticks represent whatever time frame you're looking at so if you're on a daily chart this is one trading day worth of action if you're on a weekly chart one week worth of action and if you zoomed all the way into a one-minute chart a candlestick and represent one minute of trading so that the green candlestick you have the open at the low of the real body and the clothes at the high and then the range of that trading period is shown in these wicks you have to low of the day if it's a daily chart and the high of the day now why the color is important because you can see these two candlesticks look exactly alike but depending on the color that's going to tell you where the opening the clothes are behind the lower going to be the same regardless it's always the top and the bottom of the wicks but depending on the color of the candlestick it's going to determine where the open and wear the clothes of whatever time period you're looking at is so you can see the open here and we closed lower so it's a red candle stick because the price went down on the day so the wicks are the high and the low the real bodies show you the open and the clothes the color indicates that and the timeframes there are pretty much infinite time frames you can be looking at the one minute to minute 5 minutes 10 minutes hourly all the way up to daily weekly monthly yearly so on and so forth so let's now look at a chart and see some examples of what these candlesticks shapes can tell us so here we have a daily chart of SPX which is the SMP 500 and because it's the daily chart i know that each candlestick represents one full trading day of action if this was the weekly chart i would know that each candlestick is one week but we're looking at the daily chart so what we can see from these candlesticks there are dozens and dozens of shapes and reshapes indicate different things whether they be bullish or bearish candle sticks and we also need to look at where they occur in the trend that gives us some clues as to what to expect as well you can have the same exact candlestick shape at the top of an uptrend or the bottom of a Down trend and it means the exact opposite thing so it's important to look at the whole picture here and just for going into some of the details right now we can see what we have here is this is a doji candlestick the high is the top of the wick the low is the bottom of the wick and you can see the open and the closer at the same price so there's no real body of the candlestick because there's no trading range in between that opened and the clothes and you can see some other candlesticks here we've got this green candlestick we know the open was the real body of the candlestick to close was the top of the real body and you can see the lack of an upper week so that shows us that we close fairly close to the high of the day and that's a strong close because there wasn't much profit taking off of the high and you can see here the candlesticks that have a longer upper week that does show profit-taking because you have the price hitting the high of the day and then by the time we close it's a little bit lower so that can tell you when there's profit taking it can also tell you when bulls are buying the dip look at this candlestick back here you see the long lower wick and the small real body so we can see the price took a big drop at some point during the day we hit the low which is the low of the wick and then the Bulls bought that dip and close it up towards the real body here and that shows you that bowls are buying that dip which would be interpreted as bullish the bigger the lower wick you know the more buying off of the low of the day the bigger the upper wick you know the more profit taking from the high of the day so those are just some basic fundamentals it's very important to look at the candlestick shapes and determine or learn what they mean and there are like I said there's dozens and dozens of Candlestick names i don't think the names are as important as long as you know what the shape of the candlestick is telling you in terms of profit-taking or both buying the dip whether it's a strong or weak candlestick that we can see here this is almost a red marker BOSU candlestick which is when the open is pretty much the higher the hey and the clothes in the low of the day and I shows you that the Bears controlled the vast majority of the trading day and it's a very bearish candlestick that supposed to a green mario BOSU candlestick where the open is the low of the day the close of the high of the day and it shows the Bulls were in full control and that we also have other indicators that we're going to go into a little bit more in depth here later in the video we'll look at the RSI these bars down here indicate volume and you can see when you put your cursor over a candlestick it tells you the volume it tells you the open to close the high and the low so if you're not seeing any of the trading going on in a particular day you can pretty much get the most important information that you need as a bit of a recap as to what went on that day just by the candlestick shape and looking at the links and the real bodies and the volume speaking of volume we're going to be looking at it a little bit more in depth here along with moving averages and both of these are tools that traders want to have in their tool belt and I refer to them as pieces of the puzzle that give us a greater picture a bigger picture of what is going on so the volume is the amount of shares traded in a given time period and if you're on the daily chart we know these candlesticks volume represents one total days worth of shares traded and if it's the weekly chart it's one total week so on and so forth so it's important to distinguish between dollar volume and just volume in general volume is the amount of shares the number but if we take a stock for example a one-dollar stock and we see a million shares traded we know that's a million dollars of volume and if we compare it to a twenty-dollar stock that sees 500,000 shares traded on the surface you would say well there's more volume in the dollar stock but if you multiply the share price by the amount of shares traded the volume you get the dollar volume so it would be 1 million shares on one dollar stock would give you 1 million dollars of volume and 500,000 shares on a twenty-dollar stock would give you 10 million dollars of volume so it's important to have that metric for comparing different stocks that might be priced at different levels because the share number alone does not give us that dollar volume that is very important so the volume also indicates liquidity and many other clues about trading action it is very essential that we have liquidity because with liquidity becomes volatility and trading opt opportunity so liquidity is the amount of volume that we see and if you see a stock that has very low liquidity it jumps around it makes charting harder and it makes trading opportunity harder as well so consistent volume and liquidity is absolutely important when you're making trading or investing decisions there's rules of thumb with volume one of those for the bowls is the Bulls always want to see increasing bullish volume on an uptrend that shows strength i refer to volume is almost like a proof indicator you can see a bullish move occur and if you see decreasing bullish volume on that move to the upside that would have me questioning the strength behind that move and wondering if it's going to be a bit of a fake out or if the Bulls are going to be able to keep up that momentum but if you see increasing bullish volume on an uptrend you know the volume is backing up the price action and the Bulls are strong there's also indications that you can get from volume on a break out when you see a stock range tighten and the trading range get tighter and tighter it's very often accompanied by decreasing volume and then once that break occurs from the tightening range it's accompanied by a spike in volume and that spike in volume can give you a bit of a heads up that the trading range is about to break volatility and price action movement is about to pick up those other things we can tell if we're in an uptrend and we see a couple red days start to form and it's on increasing bearish volume that's a heads up to the bulls that the trends might be changing to favor the Bears now conversely if we're in an uptrend and we see decreasing bearish volume on a pullback that's exactly what the Bulls want to see that's normal healthy consolidation we know no stock is just going to go straight up so in uptrends we have higher lows and higher highs and it's important that we see decreasing bearish volume on those pullbacks of consolidation that gives confidence to the bulls that they are still in control of the trend and the price is still going to go up there is also some other information volume climax is often occur at the top of an uptrend or the bottom of a Down trend and that signals a trend reversal if you see a big spike in volume and a lot of price action around the top of an uptrend or the bottom of the downtown we can know to start looking in the other direction so volume is absolutely an essential indicator to be utilizing if I were limited on the amount of indicators I could use volume would absolutely be at the top of the list for those that i would choose to keep on my charts on two moving averages now and moving averages or another essential piece of the puzzle because they tell us what the average price was over a certain period of time and they also act as support and resistance as we will show here in just a minute so there's two different kinds of moving averages they're simple moving averages and then there's exponential moving averages the simple moving average is just the calculation of the average price on whatever time frame you're looking at let's say we're looking at the daily chart so the 20-day moving average would be the average closing price of the previous 20 days of action if we're on the hourly chart the 20 period moving average is the average of the last closes of the 20 candlesticks on the hourly chart so it's the close of the candlesticks that gets factored into the moving averages and the time period let us know how far back that goes exponential moving averages are calculated a bit differently it's a little bit more complex of an equation and we're going to skip that for now we're not going to go too in depth and just a quick fact is exponential moving averages react quicker to the price so the 20 PMA would act quick quicker to the changes in prices and an SMA would but we want to keep it simple here this is an intro lesson so we're going to stick with the simple moving averages as their name so appropriately his name's so this is how they are written ma 20 that's a simple moving average 20 period if it were ma 200 we noticed the 200 period moving average and again whenever your timeframe is is going to determine whether that's the 20-day moving average 2020 week moving average so on and so forth so like I said they active support and resistance when the price is trading above moving average that moving averages support and when the price is below the moving average that moving average is resistance in terms of the length of time factored in the longer it is generally it's stronger so the 200-day moving average is a more significant price level then be 22 moving average would be so if we're above the 20-day and the 200-day moving averages i would say that the 200-day moving average is a stronger support level than the 20-day moving averages and that's because there's more time more price action factored into that calculation it's a bit of a self-fulfilling prophecy and what that means is the more people that are utilizing technical analysis and looking at these moving averages on a chart the more it's going to come into play if we have thousands of traders looking at the 200-day moving average support we can anticipate it's going to be more likely than not that when the price hits that level it's going to act as support because traders are anticipating it to act as support and they're going to be placing their buys at that level so the more people that utilize technical analysis the more that this site self-fulfilling prophecy is going to play out as we've seen over the past decade the trend is very clear technical analysis is going nowhere and it's only going to be growing in popularity over the next decade in my opinion now we're going to look at an example of the chart and what the volume and moving averages are telling us back to our trusty SMP 500 daily chart here and we can see a bunch of lines here a bunch of different colored lines and the key up here tells us what time frame we looking at I suggest when you are creating your chart to always use the same color so you get familiar with them depending on whatever time frame you're on so I always know that the red line is my 200-day moving average if I'm on the weekly it's the 200 week moving average and getting familiar so you can look here at your chart and know what the colors represent without having to keep reading the key and double-check and obviously the more that you look at these church and the more you use them that's going to become ingrained in your memory but as of right now we can see I do have a couple exponential moving averages here you can see there are a lot tighter to the price action but like I said we're going to skip those for now look at this 20-day moving average support so this level held as support for almost two months the longer the moving average hold of support the more significant is it is once that level is lost so we can see it active support here this is just two days ago on Thursday with the price bounced off that moving average support and although we dipped below it it's the close of the candlesticks that's important to letting us know if the moving averages holding as support or if it is lost and then flips to resistance so although we dipped below that moving average we closed above it maintaining that level as support now the next day we dipped below it again and now we close below it so this moving average which has been support for two months because the price is trading above it is now resistance heading into next week because we closed the day below that moving average and it is now resistance so former support now resistance and another clue that we can gain here look at the volume we see an increase in volume favoring the bears because it's a another lower high and lower low compared to the previous day of action it's a red day it's a loss of support and it's an increase in bearish volume we look back here to the reaction in November to the election look at the volume heibel volume increasing volume on that breakout and that's how we knew that move was for real it wasn't just a knee-jerk reaction to the election the volume told us that the move by the bowls one strong and like I said it's proof that the price action is going in the right direction because the volume is backing that up and in terms of a pullback the Bears are the Bulls always want to see a decrease in bearish volume on consolidation and we don't have that right now we've got an increase in various volume so we're going to be looking to the downside in the short term because the Bears have assumed a bit of control now that this moving average has become resistant in terms of other moving averages I can see this blue line of the 50-day I don't even have to look here because the blue line has been my 50 period moving average for years so I know that that is instantly what I'm going to be looking at when the blue line and the price is still above that level so that moving average is still support so i know that as the price approaches this blue line we can anticipate it to act as support look back here in late-september the price was below it and this blue line the 50-day moving average resistance with acting as resistant we see the price get above it but unable to close above it we attempt it again we got above it unable to close the day above it so it stays resistance again it's the close of the candlestick that is important and then we saw some bearish action and downside over the next three weeks due to the inability to get over moving average resistance on two trends now and like I said even if you are a long-term investor with no interest in short-term trading knowing overall trends is essential and if you have enough practice you can look at a chart and in 10 seconds you can know what the charges in an uptrend or a downtrend so how do we distinguish the prevailing direction of a stock or a commodity the components of a trend are the higher lows and higher highs we all know the familiar stair step pattern which shows higher lows and higher highs in an uptrend and like I said nothing goes straight up or straight down so it's important to distinguish that even though the stock does go down for certain periods as long as it's progressing with higher lows and higher highs that is the definition of an uptrend and inversely a downtrend is lower highs and lower lows it's important to distinguish that the timeframe that you are looking at can determine whether you're seeing enough to render a downtrend so a stock can be in a long-term uptrend on the weekly time frame over multiple years but if you're just looking at a three-month daily chart and that means it's a daily chart over a three-month period of time that can be in a clear downtrend but then you need to zoom out to the weekly chart and see that the long-term trend is still very clearly bullish that can happen many times so it's important to gather a lot of information by looking at different time frames and depending on what your game plan is that's going to depend on how much weight you put in certain time frame so like I said a long-term investor they're going to be interested in the monthly the weekly maybe the daily chart but not as important as the weekly and longer-term charge if you're looking years out if you're a day trader the weekly chart is not nearly as important as the hourly chart because that is much shorter time frame and you're interested with what's going on right now not what's going on in the year-long outlook of the stock so it's important to know what the overall trend is because when you're trading your game plan is going to be a little bit different depending on whether you're trading with the trend or against it now we know the saying that the trend is your friend and you want to be trading with the trend that is absolutely the truth and it's a lot easier to trade with the trend but they're certainly opportunities trading against the trend but whenever you're trading against the trend the duration of the train is going to be shorter so we have scenarios where we see an over reaction in the market we see fear and panic and stock completely dropped and we know it's clearly in a downtrend the Bears are in control but if we get some indications from the indicators like the RSI and volume and we have moving average support being approached we know that we can look for a short-term oversold bounce and we know that it's going to be a short-term trade because we're going against the trend so if you're going against the trend duration of the trades or shorter if you're trading with the trend the trade can play out over a lot longer period of time because you know you have price history in your favor so let's give an example of each of these trading with the trend and trading against the trend so back to the S&P 500 daily chart where each candlestick represents one trading day worth of action this is a three-month chart and you can see we are clearly in an uptrend we had to pull back to start october but we bounce look where we bounced right off the 200-day moving average support so that moving average acting as support and look at the reaction the Bulls had from that level we had a big bold move there are higher high we consolidated normal healthy consolidation for short-term periods we formed a higher low continuation with a higher high and now we're consolidating again so on the daily chart we're going to remain in an uptrend as long as we form a higher low on this pullback that is higher compared to this low so this low was a 2187 rounding here 2187 and we could pull all the way back to 2188 and it's still a higher low and the uptrend would still be intact looking at a weekly timeframe where each candlestick is one week of action and this is going over one year and three months we can see we are also very clearly in an uptrend here where we have our lows we have our higher lows and higher highs as the Bulls progress here and we can see that pretty much every time there is panic the Bulls by the debt here's our break that panic and pulls back the dip and saw a big higher high then we have the election panic with Trump winning surprisingly and we've got a higher high here again so the uptrend is very clear and we are going to remain in an uptrend as long as we consolidate and form a higher low compared to the low of the most recent pullback here 2083 which was right before the election so trading with the trend we can see that on consolidation we should be looking bullish because historically in all of 2016 every pullback has been bought by the bowls and led to higher highs so trading with the trend of the SMP 500 would mean looking for bullish entries when we have a pullback now conversely if you were trading against the trend you would be looking for short-term pullbacks you can see here these red weeks we have three red weeks before the bull show back up three red week so you can see that the periods of pullback are shorter term compared to the period of bullish activity which is going with the overall trend so if I were playing anything bearish in the SMP 500 I would know to keep my short my trading timeframe short because I'm going against the grain in terms of the overall trend let's now look at some downtrends here is an example of a Down trend it's GW ph on the daily timeframe and we can see our high back here and early October we pull back significantly we established our low about attempt it's still a lower high we look back at the price action 137 88 and the highway here was one 3451 so still a lower high we pulled back and we had a lower low below this consolidation was 110 65 and we broke that level hitting down to 10 7 10 so there's a clear lower high and a lower low another lower high and a tight trading range so you look at this daily chart and you say ok GG WP h is in a downtrend and that is true on this daily chart but it's important to get all the information look at lots of different time frames to put the pieces of the puzzle together and we look at the weekly chart and say oh mandy WTH is actually in a long-term bullish uptrend since back in mark very clear higher lows and higher highs progressing up for the bowls and we actually hit an all-time high back here in october so we're seeing be pull back from that time high it might be a little bit deceiving as we zoomed in and only focused here and if this is the only time frame we use the daily three months chart it would be essentially having blinders on and missing the overall bigger picture that we can see by zooming out so we know that the bowls are in control of the longer-term timeframe so while we may be looking bearish on the daily chart we can anticipate that it is more likely than not that the Bulls will show up to keep this day this weekly uptrend intact over the long term so we might be looking for shorter term trade if we are looking bearish on the daily timeframe and that being said we can also be looking for longer-term bullish entries anticipating that the Bulls are going to show up again as they have been doing all year after period of consolidation hi guys Jason here partner with the target.com and i'm joining down today to talk to you a little bit about indicators so by now your technical analysis career you've probably come across some charts with lines you might not yet understand and those are very likely just going to be different forms of chart indicators so right off the start indicators are just a complex way of representing market data they take price information they rework it manipulated change it and they find new and interesting ways to visualize it and these changes are all do the mathematical calculations that have different goals but the end of the day they're all using the same price information that we see in our candlestick terms there's a few very important items that i want to express regarding indicators first indicators are descriptive they are not predictive they take old data over different periods of time the average it they calculated to change it and they use that data and represent new forms because of that indicators tell us what has already happened not what is going to happen secondly indicators are always lagging like I said they use previous market data sometimes up to two weeks old or 14 periods and they take information about what happened and they use that to attend to forecast if you will what's going to happen in the market so in that respect it's a lot like trying to predict the weather we take the current set of conditions we compare that to the historical set of experiences that we have in similar conditions and we attempt to predict what is going to happen based off what has happened previously indicators themselves have a very wide range of complexity you can have a single line indicator that simply it's a three-day average so for example if we have three days of price action or are closing prices five dollars ten dollars and fifteen dollars if we have a three day moving average of that price or are three ma it's going to be ten dollar and there are simply through countless indicators that are available literally hundreds of them and new indicators are being developed all the time we have macd we've got our side that we're going to look into we've got the notion thing with stochastics faster castex slow stochastic balance of power average directional index average true range there's literally hundreds of these indicators that people have developed that all used price action price history and the try and change in a new way to give them the edge and give them a competitive aspect in the market so really that the take-home lesson that i want to express these last few minutes is that indicators are just a really complicated way of showing you things that you can already see the same data is being used and it's being calculated and presented for you so we're gonna be using indicators I feel that it's critically important to understand how indicators are derived how the information is collected manipulated presented in really having a solid grasp on what is happening behind the scenes before we start utilizing indicators in our daily trading I think you'll encounter a lot of people who use the MACD who really have no clue how it functions or what it does for someone looking for lines crossing lines without understanding the math that's going on so with that in mind what I'd like to do is pick a look at the RSI indicator bring to investigate what it is what it means and then we're going to get into the real meat and potatoes of it and take a look at the calculation that's happening that drives our RSI value so what is the RS hot the RSI is termed the relative strength index and it is an indicator that measures relative velocity of price movement to proceeding so it's an indicator that tells you essentially a particular stock is overbought or oversold and it does this by presenting a value that is based on a 0 to 100 scale where 100 is an over block condition and 0 is an oversold Commission and it takes 14 periods of price information so if you're looking at a 14 so if you're looking at a daily chart you can use the last 14 days of information if you're looking at a five-minute sure it's going to be using last five minutes it can be using the last 14 five-minute period in its calculation so this value represented as anything between 0 and 100 supposed to tell us something is overbought or oversold now how can we use something if we don't really understand what is happening and that's why we're going to look at the map so that you can get a foundational understanding of what's happening in all indicators not just the RSI I guess I said we're taking price information and we're changing it and now we're going to learn how it's changed for the RSI in particular so now we're going to look at the actual RSI calculation what's happening minus team gives us our value on the 0 to 100 scale so we're looking at the RSI there is one major calculation a sub calculation that has two components with two different calculations that contribute data to the overall data set so it will serve the very top and look at our major calculation and that is relative strength index equals 100-100 over 1 plus the RS or RS is your relative strength to complete this calculation we need to understand what relative strength is and that is the average gained over average loss now the RSI is a 14 period momentum indicator meaning we use 14 days worth of data if we're looking at a daily chart so over here on the left of the screen we can see that we have 33 days where the data that we're using our our calculations and because we are using the 14 periods we need to have at least 14 days to start our calculation so ers is actually two different components to its calculation the very first one is the sum of gains over the last 14 period / 14 to give average or in the case of losses it's some of losses over the past 14 periods and / 14 to give your app now we look over here and our average gain column click on our first value for average games we can see that it is a collection of all of the games and a lot previous 14 periods that are summed an average 224 likewise losses in red here are collected averaged and represented and then RS is simply our average games / our efforts losses resulting in 2.39 now that support the very first set of data for the first representative value of RS after that when we still incorporate the 14-day average we don't need to 14 periods of data because it's already been incorporated to our first average average lost value so what happens now is the calculation changes from some of games of the last 14 beers / 14 to a new calculation which takes our previous average gain x 13 plus the current gain over 14 now that probably sounds confusing and it is so we'll take a look at exactly what's going on there self average gain in this case we had all 14 periods sounds average now when we go to our next data set we're not going to be using that system anymore we're going to be using the second component here and we can actually see that what we do is we take that point2 for value which we know incorporates that 14-day dataset and the newest gain which in this case is nothing and because it's nothing our value decreases because we could take a loss on that day we can see that our average loss increases and rs changes because of that so we've sort of established would be RS is a basic value and we can see that as our average gains increase and decrease our artists changes and moves up and down our RSI the major component of this calculation takes that information and use it for its calculation so if we look at this value of 70.5 three and we go up here to our Excel calculations if we ignore the other excel magic what's happening here we can see the RSI it's 100-100 divided by 1 plus J 17 which in this case represents that days RS values now for those of you who are strong in math and I am certainly not stronger mass a lot of this can be really confusing and these values that we see for RSI constantly change because we did it comes in all the time right every day and every period we see new changes new prices and rs and because of that changes an RSI in our archive values we can see in this chart here changes in correspondence to our RSS value now the goal of what i was trying to do here today let me show you that even a basic indicator a single line in the case of the RSI has a very complex mathematical scheming behind it and so me personally in order to understand how indicated works i feel that i need to investigate what's happening behind the scenes i need to have a grasp on the fundamentals of that indicator and I need to know what that value actually represents so if you're going to be using indicators i really encourage you to at least spend a little bit of time in your foundational studies to go into the math look at what's happening with an indicator where is the value coming from what components are being combined manipulated and represented and when you actually looking at a screen when you see a red line cross a black line what does it mean what does today to come from and how can you use it once you have at least even a foundational understanding of the mathematics behind your indicators you're going to be so far ahead of your peers who having some of the time who haven't put the effort in the study and who ultimately will be coming to you for knowledge because you have a grasp on what your indicator means and what is telling you about the price action so I hope that was helpful I was a really quick introduction there are many more videos that we have regarding indicators and help to keep making them in the future so thank you for checking out our video and go back to dance so back now to the psychology aspect and how human emotion is shown on these charts it's the shape of the candlesticks combined with these other indicators like the RSI that can give us overbought and oversold conditions and you're going to be seeing dozens and dozens of indicators out there and it's certainly worth exploring and finding out which ones you like best but again it's important to not get overwhelmed as to its important to focus on one at a time and look a little bit more in depth and take it slow make sure you're absorbing the information the last thing you want to do is try and watch 10 hours of video in a day because a lot of that information is not going to be retained but looking at these charts and giving the chart of voice so to speak what are these candlesticks telling us if we see a long upper wick at the top of an uptrend with some high volume we know there's a lot of profit-taking and we can anticipate that the bears are going to start to show up and we're going to see normal healthy consolidation after a strong move to the upside the volume in the weeks are really nice indications together to tell us what is going on as is the positioning on the trend that's important like I said earlier the same candlesticks shape depending on where it occurs on the trend can tell you completely different things so here's an example that doji candlestick and again that's the candlestick that looks like a cross where you have the high and the low but the open and the clothes are at the same level so what that basically tells you is indecision it shows the Bulls controlling part of the day the Bears controlling part of the day but the opening the clothes was about the same so it's a pretty much going back to the samurai terminology it's an even battle both sides battled evenly and we close at the same price that we opened now if that price for that candlestick the doji occurs at the top of an uptrend that is a bearish reversal candlestick because it shows indecision it shows the Bulls unable to continue to push higher and it has a starting to look for some pull back if it occurs at the bottom of a Down trend that indecision doji tells us the Bears are tiring the Bulls are beginning to show up and has looking for some upside and if it occurs in the middle of its not really at the clear point of an uptrend or downtrend it just shows a straight-up indecision with neither the bowls or the Bears knowing which direction we're heading next and it shows and even battle so that's just one example again there are dozens and dozens of these candlesticks shapes it's worth getting to know them and getting to know what they are telling us by where they are positioned on the chart so this is a very very brief introduction to technical analysis it is the tippity top of the iceberg we at the chart guys have a five-hour six-hour course that is a next step going forward entries and exits and knowing how to time them with your trades we also go over a bunch of the indicators of much more in depth and really just a more in-depth grasp on how things are utilized with charge for trading but definitely worth exploring further this is step one dipping the toe into the ocean like I said and that's a pretty good analogy because the amount of information that you can find out there on technical analysis is extremely overwhelming it's important to stay focused and motivated to work towards your path toward success and be able to utilize this information for the next few decades for your entire life it's a very comforting feeling to know that retirement is not the end of income if you can utilize charge to make good trading or investing long-term decisions I appreciate you watching feel free to ask any questions we'd be happy to answer them I hope you have a wonderful day

Channel: TheChartGuys

Views: 932,780

Rating: 4.9050875 out of 5

Keywords: trade, stocks chart trading, technical analysis, thechartguys, analysis, market, stock, chart, technical analysis for beginners, introduction to technical analysis

Id: rlZRtQkfK04

Length: 41min 34sec (2494 seconds)

Published: Fri Jan 13 2017

Reddit Comments

[u/Wolf_of_WeedStreet]

You should make a portfolio with 1K and make moves based on your analysis and provide daily or weekly updates so we can see what the fruits of your analysis produce. obviously TA isnt a guarantee, but it would be interesting to see where you could take that 1K over a year...

[u/Dreaming_of_]

Can't use TA on something as volatile as weed stocks. Just saying, no beef since I love TA myself and did my master on it.

[u/[deleted]]

Thanks for this gift, excellence

[u/thechartguys]

If you do not like technical analysis, and are not interested, we will not force you to watch this video.... and we can still be friends.

[u/mikkelchap]

Thanks for doing this.

For those who don't follow TA (/r/PersonalFinanceCanada is a great resource and have book recommendations in the taskbar) it is all just more information and we can use it how we choose (or not).

And yes he isn't doing it strictly for charity - if he gets lucky and gets a few thousand views he might make enough for a coffee. No need for toxicity on our nice little niche sub.

[u/kluyvera]

If you also believe in Madame Cleo's psychic abilities, technical analysis is another one of those voodoo realms you easily can delve into and lose your money on at the same time (if you pay for their membership etc). I suggest reading credible books on investments--The Four Pillars of Investing, A Wealth of Common Sense, A Random Walk Down Wall Street. These books will say TA analysis is a waste of money. This advice has saved me a TON of money. Instead I do my own due diligence. Sedar is one of your friends. It's free.

[u/thechartguys]

No US stock market Monday, I will be going live fo free at about 9:15 AM. I will post a link in the sub and you can find it on my youtube channel.