1. Understanding technical analysis
Technical analysis involves using price charts and indicators to analyze market direction. Technical analysis helps you identify possible entry and exit points for your trading positions.
Contrary to fundamental analysis, technical analysis mainly focuses on market patterns and prices. Fundamental analysis, on the other hand, is about the factors that drive the market prices. These two analytical methods can be used independently or combined.
Technical analysis focuses on timing and price patterns, that’s why it is often considered a neutral tool. To find forex trading opportunities based on technical analysis, you need to analyse the current market price and identify possible target levels. While technical analysis does not guarantee outcomes, it provides a calculation of the possibilities for different market moves.
2.Importance of technical analysis
The majority of traders use technical analysis in determining the expected market direction. Market movements are not entirely random. When traders see an emerging pattern, there is a good chance that a lot of other people are also aware of it. You can consider the trend as something that is almost self-fulfilling. In that sense, you can say that traders help create the patterns found in market prices.
For an in-depth look into technical analysis, read our comprehensive technical analysis course.