What do you do if interviewers ask about common technical analysis tools and indicators?

1 Trend Lines

Trend lines are a fundamental tool in technical analysis, acting as a representation of support and resistance levels in price charts. When asked about trend lines, you should explain their importance in identifying the direction of the market's movement. Discuss how you draw them by connecting multiple price points and how they help in forecasting potential areas of trend continuation or reversal. It's essential to convey your understanding of the significance of the slope and length of trend lines in determining market sentiment.

2 Moving Averages

Moving averages smooth out price data to create a single flowing line, which makes it easier to identify the direction of the trend. In your interview, you should discuss the different types of moving averages, such as simple moving averages (SMA) and exponential moving averages (EMA), and how they can indicate both short-term and long-term trends. Share how you use them to generate signals for entry and exit points, and how they can act as dynamic support and resistance levels.

3 Volume Analysis

Volume is a measure of how much of a given financial asset has been traded in a certain period of time. It's important to articulate to your interviewer how volume analysis can corroborate the strength or weakness of a price trend. Describe how an increase in volume can confirm a trend, while a decrease might suggest it's losing momentum. Explain how you use volume alongside price movements to improve the accuracy of your analysis.

4 RSI and MACD

The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are momentum indicators that provide signals for overbought or oversold conditions. In an interview, you should be able to explain that RSI is a range-bound oscillator that compares the magnitude of recent gains to recent losses. For MACD, describe how it's used to reveal changes in the strength, direction, momentum, and duration of a trend in a stock's price. Highlight your ability to interpret these signals to make informed trading decisions.

5 Chart Patterns

Chart patterns are distinctive formations created by the movements of security prices on a chart and are foundational components of technical analysis. When interviewers ask about chart patterns, you should discuss how you identify and interpret common patterns like head and shoulders, triangles, or flags and pennants. Mention how these patterns help predict future market behavior and your experience in using them to execute trades with higher probabilities of success.

6 Psychological Indicators

Psychological indicators are used to gauge market sentiment, which can be just as important as any chart or number. Explain to your interviewer how you interpret psychological indicators like the fear and greed index or put/call ratios as part of your trading strategy. Discuss how these tools help you understand the mood of the market and potentially anticipate reversals or continuations in price trends based on investor behavior.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?