Introduction to Technical Analysis.mp4

Introduction to Technical Analysis at www.gmtfutures.com - Welcome traders firstly thank you for joining me for the GMT New Trader Course. I'm personally looking forward to spending time with you as I know you are going to enjoy the course we have put together. In our first video we are going to look at the two ways in which traders tend to look at the market. They are technical analysis and fundamental analysis. If you are an experienced trader you may want to skip over lesson 1.
Fundamental Analysis
Fundamental analysis concentrates on the forces of supply and demand for a given security. This approach examines all the factors that determine the price of a security in an attempt to determine the real value of that security. This is referred to as the intrinsic value.
If the intrinsic value is below the market price then there is an opportunity to sell and if intrinsic value is above the market price then there is an opportunity to buy.
A fundamentalist will often examine the true value of shares in a company based on:
1. Assets;
2. Earnings, and
3. Dividends.
Once they have come up with a number they will then determine if the share is undervalued or overvalued.
Another example would be an economist examining a country's currency based on the underlying economic factors:
1. Interest rates;
2. Economic Conditions -- including inflation, unemployment, GDP, debt;
3. Imports/exports;
4. Natural Resources;
5. Political conditions; and
6. Purchasing parity to determine the true value of that currency against another currency.
Once the economist has come up with an evaluation he or she can determine if the currency is undervalued or overvalued against a given currency.
The main issue with fundamental analysis is that it assumes that information is disseminated perfectly and that it is acted on rationally. The reality is that fundamental analysis is less accurate, particularly in the short term. In the case of the long term "buy and hold" investor, this problem is minimal because it is generally accepted that prices will move as indicated by intrinsic value over the longer term. For shorter term traders, and particularly day traders, fundamental analysis is not really considered in their trading decisions.


Technical Analysis
Technical Analysis (or charting as it is commonly referred to) is the specific study of price action, volume and or open interest of financial markets in an attempt to predict future price movement by also examining past market data.
We need to remember that technical analysis is just another tool traders use to predict or forecast future price movement. It is in no way an exact science as the markets move within random distributions of price.
The technical analyst is not concerned with the value of the underlying security, but with how the forces of supply and demand are impacting upon its price.
Technicians typically use "bar charts" to determine patterns and other indicators of repetitive price behavior. Any signs of institutional entries or exits, or reactions by retail traders are plotted diligently by the technical analyst, either to be acted upon or stored for later reference. The technical analyst therefore studies changes in the level of supply and demand for the traded instrument directly, rather than indirectly via fundamental analysis.
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Hope this helps with your trading
Regards
Shane Fry
Trading Coach
Gmtfutures/fx
www.gmtfutures.com
http://www.facebook.com/gmtfutures




Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results

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