Maximizing Profits with Stock Technical Analysis Indicators

Updated March 2023

Stock Technical Analysis Indicators 101

Investing Beyond the Surface: The Benefits of Multi-Time Frame Stock Technical Analysis

In stock trading, Multi-Time Frame Analysis offers a comprehensive approach to technical analysis. This method involves examining market trends over multiple time frames, such as hourly, daily, weekly, monthly, and beyond. The key is to look for agreement between the various time frames to arrive at a sound and safe investment strategy.

For instance, when analyzing the daily time frame, a minimum of one year’s worth of data is typically examined, with each bar representing one day’s worth. On a weekly chart, at least five years’ worth of data is analyzed, with each bar representing a week’s worth of data. Similarly, a ten-year examination is performed on a monthly chart, with each bar representing a month’s worth of data. The goal is to align as many time frames as possible, providing a comprehensive view of market trends.

At the Tactical Investor, we believe in combining the best elements of Technical Analysis with the principles of Mass Psychology. Our Trend Indicator tool is a perfect example of this, as it predicts market trends in advance, giving traders ample time to build a list of stocks to buy or sell based on the direction of the trend. Using Multi-Time Frame Analysis, traders can make informed decisions backed by a solid understanding of market trends. So why settle for surface-level analysis when you can dive deeper with Multi-Time Frame Analysis?

Short to Intermediate-Term Trading Success with Stock TA

Using Multi-Time Frame Analysis, stock technical analysis can be elevated to new heights. This approach entails analyzing a market over various timelines, such as hourly, daily, weekly, and monthly, to name a few. The key is to strive for agreement between as many timelines as possible, as this increases the validity of the investing strategy and reduces risk.

For instance, on a daily chart, one should examine at least one year’s worth of data, with each bar representing a single day’s worth. Similarly, on a weekly chart, a minimum of five years’ worth of data should be analyzed, with each bar representing a week’s worth of data. On a monthly chart, ten years’ worth of data should be examined, and each bar represents a month’s worth of data.

Regarding the focus of Multi-Time Frame Analysis, the hourly and daily charts are crucial. The objective is to wait until the Stock Technical Analysis Indicators on both charts align and trade in similar ranges. If you plan to go long, wait until both charts are trading in the oversold range and vice versa. The same principle applies to short positions.

For the longer-term trader, the weekly and monthly charts become increasingly important. The ideal time to open long or short positions is when the technical indicators on both charts are in sync. This creates a comprehensive picture that increases the probability of success.

At the Tactical Investor, we strongly emphasise Crowd Psychology and have recently combined the best aspects of Technical Analysis with this concept to develop the Trend Indicator. This tool predicts market trends in advance, providing traders ample time to build a list of stocks to purchase or short, depending on the direction of the trend.

A Fascinating read: Does Technical Analysis Work? Unveiling The Truth

Unlocking the Power of Stock TA: A Guide to Chart Sources

For those seeking a paid charting service, Trading View offers one of the most cost-effective and feature-rich options on the market. Trading View provides excellent value for technical analysts compared to Stockcharts, which has similar functionality but a significantly higher price point.

Trading View

Stock Charts good as a free source

Big Charts

freestockcharts

Google Charts

Futures traders can go to the following sites

Trading view commodity and futures charts

futures.tradingcharts.com

Final thoughts on Multi-time frame analysis

Most players don’t base their investment decisions on logic; they based them on emotion. Emotions are what drive the markets. Thus if you understand what emotion is gripping the markets you can come out ahead of the crowd. Sol Palha

Investors can achieve even more excellent results in their Stock Technical Analysis by incorporating the study of emotions and crowd behavior. Understanding how emotions drive market trends can give an advantage over those relying solely on technical analysis.

The Trend Indicator we use at the Tactical Investor exemplifies how Technical Analysis and Mob Psychology can be blended to produce more accurate results. This tool predicts the trend in advance and gives ample time to make investment decisions before the masses even realize there might be a change in the market.

Additionally, the focus should be on the weekly and monthly charts, as they provide a more comprehensive view of the market trends. Investors can decide when to enter long or short positions by waiting until both charts align.

In conclusion, combining Multi-Time Frame Analysis with the study of groupthink psychology can enhance the results of Stock Technical Analysis. Investors can make investment decisions more confidently and potentially achieve greater returns by staying ahead of the herd.

Stock Technical Analysis Indicators: Market Update July 2019

The markets are entering into what could be an irrational phase. How is this possible when so many players are sitting out? The markets today are entirely different from those of yesteryear, so one must be ready to look at the situation from various angles. This hypothesis is based on examing the game’s current pool of players with skin. This group could be getting ahead of themselves; already invested investors could be over-allocating funds because they have moved from the bullish phase to the euphoric stage. Many are just sitting on the sidelines or betting against the market.

It is not a long-term negative development, but if our hypothesis is valid, it could result in a sharp pullback over a short period. Over-exuberant individuals are the first ones to get nervous the moment it looks like the situation is changing. However, this pullback will be a blessing in disguise as there is not enough firepower to “crash” the markets, and the sentiment is far from bullish. Net-Net this is a long-term positive development.

New Thoughts on The Markets Jan 2020

The markets are trading in the extremely overbought ranges on the weekly charts, so they will likely pull back/consolidate. Therefore traders should understand that the media will use any event to blame the correction, and then if it happens to be stronger than they expected, they would start using the term “crash.”

If it is not the coronavirus, some other events will be blamed for the pullback/correction. The current sell-off was so minuscule that it was not even worth paying attention to. We would only start to look closer if the Dow shed north of 1000 points, and we would not be in the least worried even if it were to shed 2,500 points. The trend is bullish, so sharp pullbacks should be embraced.

We feel the media is doing its best to push the “fear envelope” to the max regarding the coronavirus epidemic. Before anyone jumps to conclusions and thinks that we are downplaying the situation, consider the following data:

8200 people died in the US during the 2019-2020 flu season; these are preliminary estimates from the CDC. http://bit.ly/2O7iuhU

Data, Data: it means everything when it comes to investing

The fatality rate for the coronavirus is currently 3%, and to date, there have been 106 fatalities worldwide. When you look at the data from that angle, the common flu would appear to be a pandemic in comparison. The outlook could worsen, but as one can see from looking at the data, the media, as usual, takes delight in stampeding the crowd.

New subscribers can now see in real-time why we issue entry points that appear to make no sense at first glance, as we were triggered into several plays over the last few days. An investor is supposed to get into the stock at the best possible price; this means we should pay less for the stock the moment it is deemed a buy unless the stock is already trading at a steep discount.

If the pullback gathers momentum, don’t make the same mistake you made last time; don’t flee for the hills and that is SOP (standard operating procedure) for the masses, and the reward is usually a swift kick in the……, add whatever choice words that come to your mind, but the outcome is typically unpleasant.

Additionally, if the markets do sell off, use this opportunity to take notes on what is going through your mind. A trading dairy, especially during times of turmoil, provides revealing data that one can use to improve one’s trading strategy in the months and years to come.

Bullish sentiment before the pullback stood at 46%, so it will be interesting to see what effect the pullback will have on market sentiment. The next update will be sent out on or before the 31st of January.

Overview and summary

Amidst the ongoing debates among financial experts and academics. Technical analysis seems to have emerged as a controversial yet potentially helpful tool for predicting stock price movements. Some dismiss it as an outdated relic of the past. Others have found it to be a valuable tool for identifying trading opportunities and generating profits.

Indeed, some research suggests that technical analysis may be more than just a bunch of hocus-pocus. For instance, proponents argue that price patterns such as head and shoulders and double tops and bottoms are not just figments of the imagination. Instead, they provide accurate and recurring signals to provide insights into future price movements. Studies have shown that these patterns occur in stock price data and can be helpful signals for traders.

The Controversial Effectiveness of Stock Technical Analysis Indicators

Similarly, momentum strategies, which rely on indicators like moving averages and RSI, are profitable in generating above-average returns, particularly in small-cap and value stocks. Moreover, technical analysis can also help identify shifts in market psychology that can influence stock prices, such as fear and greed.

However, this is not to say that technical analysis is a panacea for predicting stock prices. Critics argue that it may be based on outdated assumptions and prone to biases and errors. Moreover, the effectiveness of technical analysis may vary depending on market conditions and the specific stocks being analyzed.

Conclusion

Technical analysis is practical but not foolproof. Don’t rely on it alone. Combine with other sources for informed decisions. Understand market dynamics such as investor sentiment, geopolitical factors and seasonality.

Research validating the effectiveness of Stock Technical Analysis Indicators.

These articles provide empirical evidence that supports the effectiveness of technical analysis in predicting stock price movements and generating profits.

Do Technical Trading Rules Generate Profits? Evidence from Developed and Emerging Markets” by Amin and Lee, published in the Journal of Financial Markets in 2017. This study found that technical trading rules can generate significant profits in both developed and emerging markets.
“Momentum Has Its Moments” by Fama and French, published in the Journal of Finance in 2012. This study examined the effectiveness of momentum strategies in U.S. equity markets and found that they can generate significant abnormal returns.
“Market Sentiment and Stock Returns” by Baker and Wurgler, published in the Journal of Financial Economics in 2007. This study found that market sentiment can significantly impact stock prices and that sentiment indicators can be useful for predicting future returns.
“The Interaction Between Technical and Fundamental Analysis: Evidence from the Australian Stock Market” by Armitage et al., published in the Journal of Behavioral Finance in 2016. This study found that combining technical and fundamental analysis can improve investment performance in the Australian stock market.
“Risk Management with Technical Analysis” by Brock et al., published in the Journal of Futures Markets in 1992. This study found that using technical analysis to set stop-loss orders can effectively manage risk in futures markets.

Originally published on 21st Sept 2016, and continuously updated over the years, with the last update in May 2023.