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What is technical analysis?

RL087 – What is technical analysis?

Today on the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson talk about technical analysis. They dissect the benefits of using technical analysis in your investment strategies, trend indicators, and the price momentum of a stock based on volume.

[03:28] The History of Technical Analysis

[08:10] Who is a Technical Analyst?

[16:40] The Benefits of Combining Technical Analysis with Other Investment Strategies

[18:40] The Moving Average Convergence and Divergence

[20:04] Death Cross and Golden Cross

[22:39] Finding Your Favorite Trend Indicator

[25:08] Exit Signals in Technical Analysis

[26:25] Is Technical Analysis an Art or a Science?

[29:30] The Average Directional Indicator by Welles Wilder

For more links and the full show notes keep scrolling down!

Roshan Loungani can be reached at or at 202-536-4468.

Erik Olson can be reached at or 815-940-4652.

Adrian Nicholson can be reached at or at 703-915-8905.

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Full Show Notes:

What is Technical Analysis?

Technical analysis is a unique trading discipline, originally from Japan, used in evaluating investments and identifying trading opportunities by analyzing statistical trends gathered from trading activities. The two most analyzed market activities are price movement and volume. The reasoning behind technical analysis is that buying and selling actions accurately reflect all relevant market information and continually assign a fair market value to the security. Simply put, technical analysts use tools to scrutinize how supply and demand for a security will affect changes in price, volume, and implied volatility.

Understanding Technical Analysis

To better understand technical analysis, you simply need to comprehend two things: trends and support/resistance. We all know that markets can only move up, down, or sideways. And so market prices typically move in a zigzag manner, but still maintain that up, down, sideways movement. This further means that price action can only have two states: range – when prices zigzag sideways or trends – when prices either zigzag higher or lower. When you analyze these trends and ranges, you get a better understanding of when and where to enter a market, and more importantly, when and where to get out.

Technical Indicators

As earlier mentioned, technical analysts focus on patterns of price movements, trading signals, and various other analytical charting tools. And we already know that market charts always have a story to tell. However, from time to time, those charts speak a language we don’t understand. And so what the experts do is they have several technical indicators that interpret how the markets might behave. Investors then use this information to determine when to enter or exit the market. Common examples of these indicators are Money Flow Index (MFI), moving average convergence divergence (MACD), Relative Strength Index (RSI), and stochastics. Technical analysis can be used on stocks, futures, commodities, fixed-income, or currencies as long as the security has quantifiable historical trading data.

All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.

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