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Technical analysis (TA) is a statistically-mathematical analysis of historical data used by the speculator to predict the movement of prices in the future. It is based on time series analysis of prices — the "charts" (from the English. chart). And takes into account any statistical data that can help the trader in forecasting future developments in the market. Counted currency speculators can and the volume and price change over time, and so on. The trader has chosen for its work on the exchange technical analysis adopts the following assumptions:
1. the market price takes into account all
2. the market is not chaotic all over again
3. price is directional movement
Technical and fundamental analysis are the main methods of forecasting of market prices on exchanges.
The history of technical analysis and its features
And was the result of observation of price action traders over the centuries. Active development of technical analysis received in early 20th century after Charles Dow published articles, which in the future become the basis of Dow theory.
Hard to imagine, but just a few decades ago, the traders who do not have the opportunity at that time to use computers to trade, produce graphics and statistical calculations on paper, where they show the current market situation.
Feature is the lack of interest in causes of a certain situation in the market. In contrast to the fundamental, technical analysis studies price action over time, ignoring the causes. Trading volumes also applies to THE same. Thus, events, news, incidents are not interesting in the analysis of the market situation.
A key role in the technical analysis of the playing patterns represent some of the typical drawings of the graphs according to prices from time to time. "Head and shoulders," "Flag" etc are the patterns. As fundamental analysis and do not have their basis in nothing, it is worth noting that the conclusions obtained by using both types of analysis often do not coincide.
The basics of technical analysis
First, the assertion that the price takes into account everything, I think, is key And. This means that, analyzing the history of the quotes, the trader sees is always already the results of all the events that were in the past and influenced the market. It turns out that the news that came out of the accident, statements of important civil servants and so on, already included in the price. Thus, finding recurring patterns in the market, we can assume that we will see them again, even if there will be events that are likely to influence the market price.
Fake statement shows that all the market repeats itself, the price behavior is not chaotic. If this were not so, then technical analysis would not be at all. Everything is repeated, and the market is full of regularities of one or another stability in time. Trader, reveals recurring developments uses them in their trade.
The third axiom says that price moves in trends, obeying one or another trend (trend). In other words, there are time periods when price changes are increasing in nature or on the contrary decreasing. In such cases, the traders say that the market trend increasing decreasing or Vice versa.
Criticism of technical analysis
Disputes concerning the use of technical analysis does not subside until now. Some believe that everything in market not by chance that there are some psychological market the things that we see, for example, in the form of price levels. Others say that technical analysis doesn't work. Their arguments are based on the fact that it is impossible to determine the future direction of price movement, in spite of the events that affect the market price.
On the other hand, without technical analysis a trader can not determine the state of the market, to distinguish the flat from the trend. This situation stems from the fact that visual determination is not enough, because it is necessary to classify the state of the market, for a clear, objective understanding of what is happening. It is worth noting that there are attacks not only on TU but also on fundamental analysis. Therefore, it is premature to assess the vulnerability of a particular method of forecasting of development of the market situation.
Remembering about the existence of Forex indicators, you should pay attention to their device. Because the indicator is a mathematical calculation that takes into account some data, for example, cost and time, using them as variables. Further, the values are substituted into the formula and calculated, the output representing already some result, typically, in a graphic design.
Moving averages, stochastics, and others, it's all just ways of processing the values obtained from the history. Thus, we can say that indicators are tools of the technical analysis.
It follows that the indicators only show us what has happened before in the market, not to mention what will happen in the future. In this vein, and should consider working with indicators. Misconception is the view that using indicators, you can determine where the market will move. Given the device itself indicators can only speak about the convenience of visual perception that is already on the market in the past.
|Category: Forex | Added by: (06.11.2017)