Technical analysis of the financial markets Basic Information : The technical analysis is used for examining and predicting price movements in the financial markets. This is done by using historical price charts and market statistics. It identifies the previous market pattern that forms an accurate prediction of future price trajectories. It is two schools of market analysis and other as fundamental analysis. The fundamental analysis focuses on an asset value with the meaning of external factors and intrinsic value.
There are different ways to approach technical analysis as the top-down approach and the bottom-up approach. The short-term traders will take a top-down approach. And the long-term investors will take a bottom-up approach. The trader focuses on economies, then sectors, and companies in stocks. They use the approach which focuses on the short-term gain as opposed to long term valuations. There many features that are needed to maximize performance.
Identifying the signals for price trends in a market is a key component of trading strategy. Traders need to work with a methodology for locating the best entry and exit points in a market. Technical analysis is used to believe that they have created self-fulfilling trading rules. So more and more traders use the same indicators to find support and resistance levels. The buyers and sellers congregated at the same price points and patterns that are repeated.
Cons : There will be an element of market behavior that is unpredictable. No definitive guarantee will have a form of analysis as technical or fundamental as it will be 100% accurate. They should use a range of indicators and analysis tools to get the high level of assurance possible. Also, the risk management strategy in place to protect against adverse movements. Techniques like statistical analysis and behavioral economics. Also helps to guide the traders to give past information. The investors use both technical and fundamental analysis to make decisions.
view moreThere is a large range of tools used to find trends and patterns on charts. It includes Bollinger bands, moving averages, and many more. The tools have the same use to make chart movements and identify the trends for technical traders.
The candlestick charting is a used method of showing price movement on a chart. It is formed from price action at a single time period for any time frame. Each candlestick shows the price action for one hour.
They are formed by a single candlestick or by a succession of two/three candlesticks. Also used technical indicators for identifying potential market reversals.
The moving averages are the single most widely-used technical indicator. There are many trading strategies utilizing one or more moving averages. The higher the moving average number has the significant price movement.
Daily pivot point indicators are used to identify several support and resistance levels in addition to the pivot point. They are used by many traders to identify price levels for entering/closing out trades. The Pivot point levels mark significant support/resistance levels where trading is contained within a range.
Fibonacci levels are the best technical analysis tool. Fibonacci was a 12thcentury mathematician who developed the series of ratios. It is popular with technical traders. They are commonly used to pinpoint trading opportunities. The trade entry and profit targets that arise during sustained trends.
Technical analysis boils down to two things:
1)Identifying trend
2)Identifying supports through the use of price charts or timeframes
Technical analysis is based on the theory of markets that are chaotic but at the same time, price action is not complete. The Chaos Theory proves with a state of chaos that there is an identifiable pattern that repeats.
© 2020 All rights reserved My blogs (Posts) and videos is only educational purpose on stock market and depend on my self research and analysis. I can't advice to buy/sell any stock. because I'm not SEBI registered.If someone wants to inter the stock market, then my advice is first learn from an authorize institution or take advice from your authorized adviser.
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