the hAnDbook of teChnICAl AnAlysIspopular Markets and Instruments
Market participants may trade and invest in either the main markets or instru-
ments that allow access to these markets. These instruments are also referred to as
derivatives, since they are derived from the main underlying markets. For example,
a market participant may participate in gold in several ways:■ (^) By buying the physical Gold itself (main market)
■ (^) By buying or selling a futures contract on Gold (derivative)
■ (^) By buying or selling an options contract on Gold (derivative)
■ (^) By investing in Gold‐backed ETF shares (derivative)
■ (^) By investing and trading Gold via contracts for difference (CFD) (derivative)
See Figure 1.35 for a visual summary of popular markets and their derivatives.
1.9 Chapter Summary
Technical analysis is the study of market action. It is an extremely popular ap-
proach in gauging potential market moves as well as identifying past activity in
terms of patterns, proportions, and time. It involves the study of price action,
volume and open interest action, market breadth, sentiment data, and the flow
of funds. It attempts to identify potentially repetitive patterns in the form of
chart and bar formations, price cycles, and seasonality, based on the assumption
that there is some reliable degree of repeatability associated with these technical
formations.
We shall delve more deeply into these aspects of technical analysis over the
rest of this handbook.fIgure 1.35 Popular Markets and Instruments.