In chapter thirteen and fourteen, we cover a very different, yet useful dimension of investment decision-making called ‘Technical Analysis’. Based on historical data and the relationship between variables, we present a number of decision-making tools that are useful for short and long-term investment decisions. These range from charting techniques to technical and psychological indicators that reflect the markets perceptions and major trends.
A technical indicator is a method of chart analysis, usually of price over time or volume, using various formulae designed to highlight specific characteristics and provide signals to help forecast market movements. Indicators can also be derived from the use of trendlines and price patterns, which are not based on formulae and are more subjective.