What is technical analysis?
Technical analysis forms a key part of the market.
There is no doubt that you will want to know where the price of the asset goes. Well,
the answer can be found through looking at the live chart.
Even a novice trader can start to intently delve into the trading platform in search of
patterns. Oddly enough, they really are there. Any chart is a kind of language that is
akin to the one in which mathematicians communicate. A professor in any country can
easily figure out parabolic images and universally written formulas.
The same thing occurs with traders and analysts around the world. They have developed
their own language to “recognize” trading signals and make trades, according to various
strategies.
The main tools are called technical indicators: various lines (one, two
or several at once), which are superimposed on the price chart or appear below it.
Indicators mark the direction of the prevailing trend and
oscillators signaling the pivot points. They are based on a certain
formula, which is automatically calculated and displays the results in a visual mode.
It is believed that taking into account the testimony of several indicators at once can
give a clear picture of the market situation and help to forecast the further price
figures.
Once again, there are two classes of technical indicators:
- Trend (retarded)
- Oscillators (advanced)
First ones are often used to confirm the presence of a price trend and give a signal after the actual turn.
The oscillators are developed to signalize the trend changes in advance. They measure the strength of the current price dynamics and note, either:
- that the momentum of growth/decline has not dried up,
- or that the further correction (inevitable price rollback in the opposite direction) is likely to take place.
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