TECHNICAL ANALYSIS
Other method of data collecting and its usage is the endeavor to predict the price movements using the technical analysis. Technical analysis is all in numbers and lines. Technical analysts use daily, weekly and monthly regular tables and framing results. They look at numbers and data from lines and try to find out the continuity or relation with other numbers or and data. Sometimes the charts and tables appear which seem to be on the first time clear (for example if the prices for the last few weeks are constantly increasing) and sometimes there isn’t any relationship and nothing obvious.
Technical analysis is in fact studying of the numbers and lines and fundamental data can be unknown. For technicians is analysis the game with numbers not with the words. Data from charts, which create typical flaggy lines, contains such basic things as is the daily opening price, highest price, the lowest price and closing price (Open/high/low/close). These numbers are used variously. For example in Japanese candlestick charts is the most important the opening and closing price, whereas the highest and the lowest price are not so important. Other charts systems can contain only the opening price, or just closing price, or the combination. Technical analysis as studying of the prices and volumes of trades, use primarily charts to predict price trends and price movements of the assets on the basis of the last events analysis. Technical analysis is build up on the three key presumptions:
1) Technical analysis works with the presumption, that market is moving forward and do not take into account everything. Technicians believe that everything that can influence price, fundamental, economic, political, and psychological or any other data is already included in the price of the stock, commodity or currency.Everything what technicians say is that the action of price should reflect the changes in ask and bid. In other words, if the ask is bigger than bid, the price should increase. If the bid is bigger than ask, the price should decline. So everything fundamental, what should influence the price of the stock or commodity, will be visible in the price pattern, which you can see on the chart.
2) Next main presumption of technical analysis is that the prices are moving in the trends. The action of price on the chart is defined in order to identify the trend, which is turning, or is in very early phase to start trading.
3) The third presumption of technical analysis is that the history is repeating. It is logical judgment, because the pattern on the chart is the psychological reflection of emotions of various participants of the market. Because people are emotional individuals and have got the tendency to behave intemperately, charts are visually representing, how the market participants responded to the given circumstances in the past. Than we can deduce, that in similar circumstances will the market participants behave similarly.
The most used method of technical analysis is studying and interpretation of price development charts of selected assets. Price patterns on various types of charts are well reflecting the past events with the possibility of interpretation of future events. Trader, technical analyst, want with the highest rate of probability predict the price development of selected asset. In the frame of technical analysis is the Online trading the game with probability. The price development of the selected asset is possible only in two directions. The price can increase or decline. There is not any other possibility. The probability 50:50 wants every technical analyst see in more positive ratio, for example 80:20. Speculative trading on the exchanges is the realization of probability trades with high chance for making profit.
Traders use technical analysis for the decision making processes for opening or closing of their trading positions. There can be various approaches to using of technical analysis. Some traders take the technical analysis as the only one correct approach for their trading. Others take it as peripheral discipline, as one of the interpretation sources for making decisions. The most reasonable approach how to make decisions is surely the mix of reasonably used fundamental data, reasonable interpretation of particular parts of technical analysis and healthy judgment. These things must be used together with the knowledge, experience, understanding of functioning of real markets with professional approach to trading. Totally silly is the approach to trading such as looking for the Holy Grail or other warranted systems and similar interpretation techniques.
Successful trader is looking for the results in his or her mind not in the guaranteed patterns and interpretations. We would like to warn you of one fact. There are hundreds or even thousands of methods in technical analysis, technical papers and reports, indicators and systems for only two possibilities that the prices of asset will increase or decline. It is necessary to realize that all these interpretations are always only the documentation of the past and various indicators, papers and constructions are only mathematical function of the past. Many non-experienced traders are uselessly complicating their acting at the markets by excessive belief in the possibilities of technical analysis and they totally underestimate critical factors of success (knowledge, thinking, controlling of emotions). Successful and experienced traders know that in the simplicity is the power of success. They use the basic elements of the technical analysis for their decisions and they are connecting the success from trading transactions with their reasonable judgment and experience. Various tips, signals and alerts already destroy the accounts of many silly traders, who were influenced by sellers and boosters of guaranteed systems for making money.
Try to learn using free data and charts for your decisions. You have got the possibility in the frame of the Demo and Live platform CFDs and Forex to use the basic elements of technical analysis, such as the creation of the tables, charts, working with charts, basic analysis and indicators. You can use it in the frame of trading platform or through the navigation here. Part of the information on this portal is the Charts User Manual.
