Technical analysis in one of the most widely used methods of forecasting price movements. The basis behind this type of analysis is the supposition that on the market, history repeats itself, meaning that future movements can be determined on the basis of past price behaviour. Traders build their forecasts according to price changes on charts according to certain timeframes.
Simply put, technical analysis is the study of price history, through which traders are able to identify potential future trends. Traders use this type of analysis by applying technical indicators in their work, which can be found on any trading platform. These indicators come in various forms, so any trader can formulate a trading strategy for any instrument based on the findings they’ve made from one indicator or another.
Technical analysis can also be split into several types. One of the most widely used forms is candlestick analysis. Traders use this to help identify standard reversal models or trend continuation patterns (Head & shoulders, Double top, Wedges, etc.) from the price history. When one of these figures appears on the graph, traders can not only predict future price movements, but also the possible moment where a break may occur.
There are special programs able to conduct technical analysis for you. A program such as Autochartist analyses the market independently and tries to identify these patterns as they form. When they appear, the program sends an alert to the trader. Without needing to be by the computer to receive such an alert, the trader has only to react in a timely fashion to the message sent by the program. Autochartist does not need to be installed onto your computer either; it works as a web application and can also be integrated into the MetaTrader 4 platform.
Technical analysis is no less difficult than fundamental analysis. Novice traders, however, are usually recommended to start off with technical analysis, as they are helped by a multitude of various automatic programs, indicators, and advisors.
It is also important to note, however, that traders who achieve the most success do so with a combination of both technical and fundamental analysis, and by building forecasts based on a range of data from financial analysis.
Want to learn more about technical analysis?