Technical analysis

Technical analysis is a method of forecasting prices based on information about market quotations, volume and open interest. The main of the three components is the price, the study of which by technical analysis methods is most convenient, since price information is publicly available and has a long history.

Technical analysis differs from other types of research also in that it is based on mathematical and statistical, rather than economic calculations. To begin with, you need to understand the following - technical analysis is based on three postulates (remember):

• The course has already taken into account all the factors affecting it
• Price movements tend to
• History always repeats itself
• To be honest, these three rules are the essence of all technical analysis. Therefore, let me congratulate you on the fact that "technology" is now in the arsenal of your knowledge. There are only a few nuances left, and in other words, technical techniques that help to assess in detail the trends existing in the financial assets market and, accordingly, make an effective trading decision.

All technical analysis consists of the following tools:

• bar chart;
• the "tic—tac-toe" graph;
• japanese candles;
• oscillators;
• the indicator of the average course movement (MA - Moving Average).
• Why do traders prefer technical analysis? Answering this question, we will try to identify the strengths and weaknesses characteristic of "technology".

Technical analysis

Firstly, it is easier to make decisions by looking at charts, rather than digging into fundamental statistics, talking about the prospects for unemployment growth.

Secondly, technical analysis is not as complicated as fundamental analysis, because macroeconomics requires much more knowledge from us.

Thirdly, technical analysis is also effective for a short-term trade, while the foundation is considered mainly for medium-term strategies.

Fourth, technical analysis often plays into the hands of professionals. There is a term in the foreign exchange market: self-fulfilling prophecy or self-fulfilling expectations. What does it mean? Everything is extremely simple: "crowd manipulation" - a professional, due to the fact that he knows the market well, and was a layman himself, can calculate how most of the traders will behave under certain conditions, and this makes it possible to analyze the trends in the direction of the exchange rate movement and use them for his own good.

Now about weaknesses:

First of all, technical analysis turns Forex into a game of "guess" if you can guess the aspirations of the crowd, you won, if you can't, you lost.

Secondly, if the majority follows the technical analysis, then who will make a profit? Of course ... a minority (which, in fact, is happening).

Thirdly, in practice it is quite difficult to determine the correct trend line, which leads to a false analysis and, as a result, to a loss.

With all its pros and cons, technical analysis continues to enjoy considerable popularity among traders and is a worthy strategy for real earnings in the foreign exchange market.

The lesson is prepared by Amarkets