Contents - Index

Technical Analysis.

Basically there are 2 different approaches/tools to evaluate which securities are worth investing in.

One approach is the "fundamental"-analysis, where you look a company's accounting, it's key economy indicators, it's leadership, products, competitors and future prospects.

The other approach is the technical analysis, the study of prices shown in diagrams. In the technical analysis, it is assumed, that the current prices reflects all known information about the company in the market.

In this section of Amateur Invest you can have certain technical analysis' shown.

The chart window.
In the diagram window, 2 lines are shown. One is a black line, this is the actual prices, and one is an orange line, this is the technical line.

This makes it possible for you to see variations over time, and perhaps choose the right moment to either buy or sell.

The chart window; zoom with left mouse button.
You can also select a certain part of the prices and dates (zoom) by moving the mouse to a location, push the left mouse button and while holding the button down, move to another place. This will create a square, and when you release the mouse button, the graphics area will be zoomed to the selected prices and dates.

By pressing the "unzoom" button on the screen, all prices and dates are shown for the security again.

Selecting between securities.
You can select between securities to be shown, in the upper right hand corner - simply choose from the drop down list by clicking on its right side, and choose by clicking on the name.

Or you can use the navigation buttons located just under the drop down list. They work just like the buttons on a tape recorder.

Selecting between Technical analysis'.
Below the box, where you can select different securities, there's a similar button for choosing between various types of technical analysis'. The different kinds of technical analysis' are explained in more dept here further below, under the heading; "Further explanations about technical analysis'".

Selecting between period length.
Below the box, where you select which technical analysis to have shown, you can also select the period length. Technical analysis' are typically calculated over certain period length. When you choose a period length, it means, that the calculation is done with the latest prices, beginning with the start of the period specified.

Selecting sensitivity.
The sensitivity can also be adjusted. Sensitivity means the number of periods that should be considered when doing the calculation. 2 is looking 2 prices back for the calculation. 10 is looking back for the latest 10 prices, and taking them all into account before doing the calculation.

Besides the Help and Close buttons (which should be self explanatory), the following buttons appear in the window:

Resets the chart to its original coordinates (in case you have moved the chart or selected a part of the chart to be shown).

Diskette icon
If you click this icon, you can save content of the graphics window to a bitmap file. You can then import it into many other programs, eg. for reports, presentations, etc.

Printer icon
Prints the window to your default windows printer.

Further explanations about technical analysis'.

Here, a more in-dept explanation about the various technical analysis' is given. Please note that only choice 1 is available, if you are not a registered user of Amateur Invest.

Please remember, that in some cases, where the technical line only seems to go up and down a little bit, compared to the price, you can select a part of the graph to be shown, by using the mouse - look further above, to see how you can use the "Zoom"-function.

Error types:
You can encounter an error message, if a calculation is tried, and there are not enough periods. Please try to lower the amount of periods in such cases.


1) Momentum.
Momentum is the difference in prices over the period chosen. Momentum is the current price minus the price of n days ago. The momentum line can behave in the following ways: A) when the line is above zero: a rising line means an up trend is getting stronger, a level line means the up trend is holding steady, and a falling line means the up trend is fading. And B) when the line is below zero: a falling line means the downtrend is getting stronger, a level line means the downtrend is holding steady, and a rising line means the downtrend is fading.

2) Momentum Division.
This is like the momentum calculation, but 100 based.

3) Simple Moving Average, SMA.
Moving average is the most often used technical indicator. It shows the average value of prices over a given period. SMA uses an equal distributed weight of all prices that is used in the calculation.

The most popular interpretation of moving average, is to compare the price to it's own moving average. When the price breaks through it's own SMA, it is a buy signal, and when the price drops below it's SMA, it is a sell signal.

The typical period length are 10-50 (short sighted), 50-100 (medium sighted) and above 100 (long term).

4) Weighed Moving Average, WMA.
WMA puts more value to the latest prices. Since WMA gives more weight to the latest prices, it responds faster than SMA, where all prices are weighed equal.

5) Exponential Moving Average, EMA.
Uses an exponentional calculation on the moving average. This is believed to be more accurate.

6) Trend.
This shows a trend line for the period choosen. A trend is a rough average, showing the general way the prices are going.

7) Exponential trend.
Uses an exponentional calculation on the trend.

8) Relative Stock Index, RSI.
RSI is a so called oscillator, where the value goes between 0 and 100. RSI is calculated over a number of periods, where the most used are 10 periods for short term investments and 25 periods for long term.

Normally a RSI-value under 40, means that the stock is oversold, and a value above 80, that the stock is overbought. Other sources say 30/70 or 20/80.

Some of the investors that use RSI, often also use a simple moving average on top of RSI, partly to smooth out big fluctuations, and partly to confirm a certain trend, when the RSI line crosses it's own moving average.
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Page last assembled: 2008-06-05, 11:59:22:328

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