If you are in to Forex trading and wish to understand overall summary for a particular investment then technical analysis is the right tool for your help. Most of the experienced and mastered traders also take help of technical market analysis to understand the bigger picture. It is the best tool you can get to know whether you are buying and selling at fair price or entering a sideway market with awaited loss.
How do technical analyst analyze a particular investment?
Technical analysis mainly refers to predicting the future price by studying the prices of a particular investment in past. These analysts have a firm belief that the pattern of increase, decrease or uniformity in price of a product is repeated in future. According to them price fluctuation is not random but mainly depends on the pattern followed in the past. On the basis of this broad assumption they examine the past price fluctuation pattern and forecast the price change in future.
Create an entry and exit point by technical analysis!
Various pie charts, bar diagrams and other flow charts made by the expert analysts can give a fair idea about the price fluctuation pattern of the investment. Apart from that some of these charts can also prove to be helpful in understanding the market trends while some others help in understanding the sustainability of these trends. All these studies can give you a fair idea about when to enter and exit in a particular deal.
Another benefit of technical analysis is that it reduces the emotional quotient of the person with a particular investment. Since everything is planned and rationalized, emotional attachment to the deal is less.
Various parameters that can be judged using technical analysis!
Technical analysis can be used in judging various parameters of a particular investment. Some of them are discussed below.
Trend: It mainly refers to usual nature of the price for that investment. It indicates whether it is usually up, down or sideways.
Strength: Volume or open interest in certain investment can decide its intensity of market opinion at certain price which can further show its strength.
Volatility: Volatility of a particular investment is price fluctuation on daily basis.
Cycle: As the name suggests it mainly refers to repeat in pattern of price fluctuation in an investment.
Support/resistance: Depending on demand and supply it is the price level at which market fall, rise or reverse.