Technical Analysis  

What is technical analysis?

Technical analysis is the study of historical price action in order to identify patterns and determine probabilities of future movements in the market through the use of technical studies, indicators, and other analysis tools based on the belief that all current market information is reflected in the price. Technical traders will always tell you “It’s all in the charts!” Technical analysis can help you determine not only when and where to enter a market, but much more importantly, when and where to get out.  

Technical analysis is based on three fundamental factors.

The market discounts everything: All factors, from fundamental factors  to news and economic data, are already “priced in.”

Price moves in trends: Includes short, medium, and long-term trends which can exist independent of one another.

History is often repeated: Price is more likely to act in a manner consistent with past performance than to act erratically.

There are many ways to identify patterns in the financial markets, but most technical analysts focus on the following:

Technical Analysis Chart Patterns: Technical analysts use drawing tools, such as horizontal lines, trend lines and Fibonacci levels, to identify well known chart patterns. These patterns, once identified, give clarity to the strength and weakness of both buyers and sellers in the respective market.

Technical Analysis Candle Patterns: Traders use price charts, such as candle charts, which display the open, close, high and low price levels of a particular time frame. They use these charts to attempt to identify clues on the behavior of buyers and sellers in a short period of time.

Technical Analysis Indicators: This is where traders use technical indicators to help in understanding the market condition. For example, many indicators provide signals on when the market is overbought or oversold. Other indicators can provide traders with clues on either rising or falling momentum.

 

How is technical analysis used the in market place?

Technical analysis in Forex trading is used to spot key levels and figures that can give clues regarding where the price of a currency pair is headed, and it does so only using the information on graphs.

 

What is the preferred method of trading for ThatFxTrader?

Technical analysis is the preferred style of trading due to its ability to forecast price movement of virtually any tradable instrument that is generally subject to forces of supply and demand.

 

What is the difference between fundamental and technical analysis?

Fundamental analysis is generally not used as a tactical, short-term decision-making method. Technical analysis enables traders to gain a vision of the market and make the right move at the right time, while fundamental analysis should be applied strategically, over longer periods.

 

Where do you find tools for technical analysis?

Remember technical analysis is very subjective. Always do your own due diligence. There are many tools that can be used for technical analysis. The easiest way to start is having a reliable, high quality trading platform. TradingView.com is that platform. TradingView has everything you need to start.  

 

Interested In Technical Analysis?

Visit our Toolbox (click here) to begin your technical journey!

 

Want To Take Your Trading To The Next Level?

We offer a variety of trading courses to deliver to the needs and levels of all traders. For more information, click here.

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