What is Technical Analysis?

That's a very good question; I'm glad you asked. There are probably thousands of valid answers but I'm going to give you mine OK? In a nutshell:

“Technical Analysis is the Study of Market Metrics for the Purpose of Determining Risk & Reward Percentages”

If you are new to technical analysis then that is a mouthful. So lets take a step back and look at the big picture.

What is investing? Investing is puting your “capital” which is a just a fancy word for money, to work in the hope of increasing the quantity of it. Before anyone can enter the word of investing, we first must first have some money they do not need right away. Once we have some money to invest we must decide how much risk to take on. We must decide if we want to be an “owner” or a “lender”.

Lets consider the lender first since practically everyone is. Do you have a bank account? Then you are a lender. Your bank pays you a (probably tiny) amount of interest for the privelege of lending them your money. They proceed to lend out many times what you loaned them using your money as collateral… but thats another story. Your “depost” in the bank is a loan and you are a lender.

Now lets consider being an owner. When you buy an “asset” you become and owner. Ask any home owner, there are major benfits to being an owner. You get to reap the benefits of “appreciation”. But there are also risks for instance if the plumbing breaks you are responsible for getting it fixed. The concept here is: ownership carries with it higher risks and rewards than being a lender does.

In the world of “tradeable instruments”we can be an owner by purchasing stocks or we can be a lender by purchasing bonds. There are two ways of analyzing the value of a tradeable commodity. They are technical (analysis) or TA and fundemental analysis or (FA). Often times market analysts fall into one camp or the other. Obviously since you are reading these we pages you know that I fall in to the TA camp but thats neither here nor there. I have no objections to fundemental analysis. I believe it has a place in investors' arsenal of tools. I do believe that over time, the fundementals do prevail. Its just that the time frame, often spanning years or even decades, over which fundementals take place is much longer than I want to consider.