Getting Started with Technical Analysis

Be Skeptical & Use Common Sense
Be skeptical of everything you see when researching technical analysis. Analyzing financial charts is a lot of fun and can be very profitable but there is no 'magic formula' that is going to make you rich. If it sounds too good to be true it usually is! Consider for a moment... if someone actually devised a scheme to yield a %40 (or more) annual return on stock investments do you think they would be spending long days trying to convince you to buy their product?

Tools in this industry fall roughly into two categories. First, there are tools that help you perform analysis on charts by performing calculations and displaying indicators. These tools can save you a lot of time and allow you to perform very complex analysis in a short amount of time. Sometimes these tools educate you as to how the indicators work and why you might use them. Using such a tool will educate you and let you grow into a successful analyst. Second, there are 'tools' that analyze data for you and churn out buy and sell signals. Commonly, these applications do not tell you exactly, if at all, what they are doing. More commonly these applications come with brochures containing pictures of successful looking people with attractive mates (frequently sitting on a yacht) with quotes about the huge returns they have gotten using the tool. Again, stop for a moment...

Start With an Appropriate Analysis Tool
Technical analysis software ranges in price from free to several thousand dollars. If you are a novice, it is in your best interest to start off with one of the cheaper packages for several reasons:

You may find that you simply don't like analyzing charts, in which case the less money you spend up front the better.

Software that is too complex could overwhelm you and keep you from learning fundamental analysis techniques that are crucial to success.

You can be a successful analyst using only the tools provided by lower end software. Having several hundred indicators available doesn't make the novice successful.

There are several analysis tools available for less than $100 - shop around and find something appropriate.

Technical Analysis is an ART
Consider a pair of carpenters, both with knowledge of how to use hammers,