Analyzing securities and making investment decisions is complex and there are several methodologies to do so. Among the primary methods, technical analysis is the most used method in case of forecasting the price movements of market-based on already reflected past data.
Technical Analysis is a technique to forecast the direction of price movements through the use of actual price behaviour of instrument or market based on the price reflected in past in all the relevant publicly available information.
Unlike the fundamental analysis, technical analysis does not determine accurate future of the market. Technical Analysts predict how the market “might become”. Various types of charts are used for technical analysis.
Technical Analysis is used for various financial elements like stocks, commodities, indices etc. Basically, it is applicable where the price and market is influenced by ‘supply and demand’. It works based on price range like ‘high’, ‘low’, ‘open’ or ‘close’ and that within a provided time frame which can be like intraday, daily, weekly as well as monthly data.
Technical Analysis gains the majority of upvote in comparison to the fundamental analysis and it is quite a debate. But in general technical analysis is beneficial for short term trading like day to day to intraday trading. Main benefits of technical analysis are:
Indicators in Technical Analysis
Technical analysis is all about using and analyzing past market data. So, as opposed to any subjective method, technical analysis uses the ‘Indicators’ more than any other subjective methodologies. Indicators are statistical calculations which use trends, money flow, momentum and volatility. This helps the traders to create their buy or sell patterns and measure actual price movements.
There are two types of indicators which are primarily used –
On the base of how they are built, indicators can be divided into another two types –
Following are three must-know indicators that technical analysts use majorly and also can be used on Omnesys/Thomson NEST Trader:
Disadvantages of using Technical Analysis
Still, have some queries about technical analysis? Drop your questions and we’ll try to revert to your comments in the least time.
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