If you look closely at the trading world, it revolves entirely around “forecasting”. Every trader or investor would like to know what the outcome (technical analysis) is for a particular security or stock, before parting with their hard-earned money!
In fact, seasonal veterans are able to accurately predict the ups and downs of financial securities. That’s how they make countless money!
But that “ability to predict” is not present in most people. Even experts can make mistakes sometimes, forget newcomers to this community! Therefore, a new tool called “technical analysis” has been launched to help with such issues. As the results of its use have proven to be favorable, more and more traders and investors are investing in it.
Let’s examine all the features of this new tool–
(1) The correct definition of technical analysis is “the ability to predict a particular security in the financial market”.
(2) This type of analysis revolves around actual market movements; this is not the case with fundamental analysis. Factors related to politics or economics are pushed aside, although they have an impact on market movements.
(3) Look for patterns or trends that can be repeated in the future. When this knowledge becomes available, predicting what will happen in the future becomes easy.
(4) Although this analysis is quite reliable, it is desirable to go for a thorough analysis. A comparison between the results of both will give a double advantage of accuracy.
(5) How does fundamental analysis differ?
If a thorough analysis needs to be made about a particular company, it includes factors such as – how the company manages money, what its performance has been in the past and how stable the current government is in terms of currency trading. Thus, this analysis examines the reasons for market movements.
The only thing that matters to technical analysis is how the market will actually move. The current or past performance of the company, how it takes care of its money – it all matters!
(6) Everything that claims to be perfect is naturally viewed with skepticism! So is this new tool and its claims to be effective and accurate! People wonder how past market movements can help predict the future?
(7) Technical analysis will have to be used using several indicators to predict the future of financial securities, such as – volatility indicators, price change indicators, strength indicators, etc.
(8) Indicators alone are not enough, some kind of software is also necessary for the purpose of monitoring results. The software should have these features – real-time data streaming, zoom functions so that, among other things, changes can be clearly seen and plotted based on predictions.
(9) There is a lot of software available on the market, but it is advisable to choose one that studies how a particular protection has behaved in the past and accurately predicts its future.
(10) How are market patterns detected?
Each day, the opening price for a particular security, its highest price for the day, the lowest price for the day and the closing price at the end of the day must be taken into account. Daily data collection leads to setting the pattern for the future.
(11) The most important thing to remember is that no technical analysis can be 100% successful in its predictions, despite the best available software. This type of tool is intended to serve the guide only.
(12) Finally, whatever the software is, whatever the technical analysis, the ultimate decision maker is the “person”! Yes, this tool with its software gives very good guidelines, but instinct or sixth sense should play a bigger role if a trader or investor wants to achieve great success!