Technical Analysis

What is Technical Analysis?

Technical analysis is an approach to figure out price actions, examine the financial markets, using charts, historical prices, market statistics.

 It is founded on the idea that if a trader can identify patterns, he will be able to produce accurate expectations for future price moves.

Technical Analysis

is an approach of two to analysis the market, the second is fundamental analysis. 

Fundamental analysis focuses on asset’s “real value” considering core value and external factors, meanwhile technical analysis depends on charts. 

An analysts will be identifying patterns on charts, to predict the future.

Examples for Technical analysis

Technical analysts can use a wide array of tools to help them find the trend and patterns, that includes: 

  • Moving averages,
  • support
  • resistance levels,
  • Bollinger bands.

All tools aim at single purpose: make the analyst understand the chart, and identify trends easily.

Pros

  • Ability to identify price trends a fundamental component in any trading strategy. All traders need the best method to identify entry and exit points, here comes the technical analysis, which is the most common type of analysis to help with that.

  • In fact, technical analysis tools are so common, that many see that they can have self-fulfilling trading prophecy, as trends repeats itself, because there is a growing number of traders using the same patterns to find support and resistance points.

Cons

  • There is always an unpredictable market behavior. There are no guarantees that the pattern is 100% accurate, that is applicable to both technical and fundamental analysis, as historical prices gives us a sharp look into a possible price trend, but it is not always the case.

  • Traders can use a set of indicators, and analysis tools to get the best guarantees, but they should keep a risk management strategy to help them against contrary moves.

Start Trading Now!