brain teasers you have 8 red and 16 blue socks. there’s no light in your room, so you have to...
TRANSCRIPT
Brain Teasers
You have 8 red and 16 blue socks. There’s no light in your room, so you have to choose your socks in the dark. What’s the minimum # of socks you need to choose to ensure you have at least a matching pair.
What is Technical Analysis (TA)
What determines the price of ____? Fundamental vs. Technical Analysis
Fundamentals = Valuations Technicals = Market Action
TA is probabilistic Says that this is “likely” to happen
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Assumptions
Prices SOMETIMES move in trends “Markets may witness extended periods
of random fluctuation, interspersed with shorter periods of nonrandom behavior. The goal is to identify those periods” –Shcwager
History repeats itself Because of market psychology
Market efficiency
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Charting Patterns
Visualize price movements Can be simple “eyeballing intuition”
or looking for specific patterns Many charts use Candlesticks
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Head and Shoulders
Target = High/low point -/+ neckline The more level the neck, the more
reliable the pattern
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RSI
Momentum indicator Shows breakouts or trend reversals
Leading indicator RSI=Avg closes up / Avg closes down 14,16,9,25 day lookback
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MACD Momentum indicator Lagging indicator MACD = difference b/w fast and slow moving
averages Generally 12, 26 period EMA’s
Signal line 9 period EMA
Can turn into leading indicator Works best when used with another indicator
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Bollinger Bands
Price/Volatility levels over time Consists of 3 bands
Usually 20 bar SMA, 2 std devs
Gives a relative level of high/low Multiple ways of trading
Most effective is range trading during low vol periods
Options implications too
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When to use TA
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” – Buffet
Entry/Exit prices Algorithmic Traders (computers) Markets
Currencies = Great Futures = Great Stocks = Decent
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