Technical Analysis

There are many indicators you can use in Technical Analysis to help you anticipate future price movements. Just like Fundamental Analysis, it makes it easier for you to decide whether you should buy or sell by studying the chart itself. Technical Analysis is the study of historical price data in an attempt to forecast future price movements and price trends. It involves a study of the market itself rather than news, datas or rumours (Fundamental Analysis) that affect the market.

You will need to have the charting software in order to study the chart and be able to identify the indicators. You can easily have access to the charting software by opening a trading account with a licensed Broker. The chart will record the market info in graphic form, usually taken at regular intervals - daily, weekly or monthly.

If you are new to the market, you may find it very confusing to figure out which indicators to use, as there are so many different types of indicators. As such, it is advisable to start with the simplest indicators first and see how it works instead of using all the different indicators at once.

One of the most versatile and widely used of all technical indicators is the Moving Average.

Example :-
If the market closed @ 90 sen, 100 sen and 110 sen on 3 successive days, you can construct a 3 day MA by plotting the average closing price of the above 3 prices. As such, the first plotted point would be @ 100 sen.

If the closing price on the 4th day is 120 sen, then the second plotted point would be @ 110 sen, which  is the average closing price of the 2nd day (100 sen) , 3rd day (110 sen) and 4th day (120 sen), and so on.

The most commonly used MAs are the 5 day MA and the 20 day MA which you will be able to identify easily from the chart. You will be able to indicate the price movement everytime the 2 MA crosses each other.

The following examples can serve as a useful guide on how the MA is used as a technical indicator :-
Example 1 : 22/9
                   Fundamental
                   - FCPO ended sharply lower on Thursday at 3009 amid a broad selloff as investors reacted
                      to an increasingly gloomy outlook on global growth after US Federal Reserve initiated a
                      new program of monetary easing. Spillover selling from declines in CBOT [soyoil]
                      added pressure to FCPO. An improving outlook on production in Malaysia and price
                      outlooks for vegetable oil markets from an upcoming industry conference in Mumbai
                      this weekend that market participants expect to be bearish weighed further on prices.
                   Technical
                   - FCPO started on its downward trend as MA5 line moved downward to cross the
                      MA20 line.
                   FCPO opened at 3040, closed at 3016. Down 24 points (RM600).