When to use technical analysis
For me this depends on the market I am investing in. I have different rules for funds, stocks, bonds, real estate and commodities. Each of these markets is different and therefore I use a different approach for each. To be honest I don't use much technical analysis in my investing. Technical analysis is more useful for shorter term trading which I don't do.
I prefer to keep it simple so I don't use stochastic, relative strength, MACD, Bollinger bands, etc and stick to long term moving averages and very simple price support and resistance levels.
Which asset classes should I use technical analysis for?
A financial investment has two ways of giving you a return, income and capital gains. I've ranked the above asset classes according to the stability and safety of their income stream.
1. Real estate
You could argue that income from bonds is safer than real estate, it would depend on the grade of bond you are referring to. Bonds here refers to both government and corporate bonds. Next comes funds which means index trackers (FTSE100, S&P500, NIkkei225, etc) but could also mean any equity fund. Stocks refers to individual stocks, obviously the income from a fund is much less risky than an individual stock. Finally comes commodities which generate no income.
At the top of the list income is the main source of return so technical analysis can be largely ignored. I wouldn't use technical analysis to buy bonds or real estate (I'm referring here to individual properties not REITs) and would simply invest in these when the yield looks attractive.
Funds are a bit of a grey area. I would say it depends on the type of fund. A large broad fund like a FTSE100 tracker would be a good long term investment when the dividend yield is high (hence the price is low) but a smaller or more specialised fund such as a fund investing in Thailand stocks you might be better to use some technical analysis to try to reduce your risk.
For individual stocks technical analysis can help to time your investment and also warn you of any investment opportunities that appear to be too good to be true. When a stock appears to be good value but its price if falling your should be wary of investing. Maybe all is not as it seems.
Finally for commodities it is extremely important and for me the only thing I use to value them (As commodities typically make up a small part of one's portfolio spending a great deal of time researching them is an inefficient use of your time) . Commodities tend to trend much longer than stocks or other asset classes so getting the right trend is important. You don't want to be buying gold when it looks cheap only for the price to continue falling for the next 10 years.
What technical analysis is best?
100 day support and resistance lines
I like to keep it simple. The main tool I use is a 100 day high/low price channel. Below is the channel on the stock BATS.L
As you can see the stock is clearly in an uptrend. The top of the price channel, the 100 day high, is continually being broken and the lower channel, it's 100 day low, is not being touched.
Below is a chart for Coffee. You can see the 100 day high being broken continuously in the left of the chart then the trend changes direction and the 100 day is broken continuously to form the downtrend.
2000 day moving average
For commodities I use a long moving average. 2000 days in fact which is about 8 years. Why so long? Well when I value commodities I value them based on long term historical prices. I find a long term moving average to be a good way to monitor where we are in comparison to historical averages. Below is a 17 year chart for coffee.
Investing when the price is below the moving average and in a uptrend (defined by a break of the 100 day high) would be both safer and more likely to yield solid returns.