Technical analysis or what is popularly known as charting is one of the most obvious and effective ways of trading spot opportunities. As the name does suggest charting involves charts and what a trader does is that he or she directs his or her investment depending on trends portrayed by the charts. The basic technical analysis involved in charting includes the following:

Moving average (MA)

For a technically based trader the moving average is arguably one of the most effective and important tools of analysis. In terms of spot trends and opportunities moving averages are very easy to read and interpret the market and aside from forming the basis of other market indicators and theoretical predictions, the moving average is the most common indicator in predicting trends in the market precisely in high volatile markets. The good thing about the moving average is that it allows the trader to soften the price and volume fluctuations on the basis of very concrete highlighted trends and in fact, this is absolutely verifiable.

Bollinger bands

As noted earlier the moving average is the most significant technical analysis tools but even so, the effectiveness and pin point accuracy of the MA can be assured and guaranteed by putting  bands around them. Financial markets move up and down in trends and quite significantly, the movement is roughly two-thirds of the time. Once you have the bands in place it will be easy to predict trends. For example to know if the market is outstretched, the moving average in question will be out or touching the band.

Relative strength index

The RSI or the relative strength index is quite effective and very relevant to traders. The good thing about the RSI is that it uses a formula to compare upwards and downward trends of prices within a certain and specific time frame. The diversity of the RSI is that, it can be on daily, intraday or even weekly basis but all in all, the technical analysis involved by use of the tool is very accurate. In many cases the 14 period is the most common all be it there are provisions of shorter periods. The range of the indicator is usually 0-100 and readings ranging from 0-30 are actually considered oversold and the price may as well have gone down considerably while readings ranging from 0-70 will indicate an overbought meaning that prices temporary have scaled up quite remarkably.

The techniques involved in all this highlighted tools in technical analysis are very basic and a very good head start for any technical trader. Charting however has a lot of techniques some which are complex and others relatively basic. The essence of technical analysis is the trends and it should be understood that trends in financial markets will never stop.

Support and resistance

When selling and buying becomes hugely significant on a certain price, that is quite a significant barrier on the chart, Just to keep you informed, barriers that prevent prices from going up are called resistance while those that prevents the price from coming down is called support.