In order to work in profit in the forex market, a trader must know all the tools used for analysis. One method is technical analysis. Some consider it an effective method. Some tend to think that technical analysis on Forex is not needed. But one way or another, traders spend it anyway. Let’s try to understand the details of technical analysis.
As mentioned above, most traders consider this method to be quite an effective tool. This is the easiest method to predict the market situation in Forex. It also consists of instruments which include candles, oscillators, and bar charts. And in some cases, use the value of the average course.
So a few words about the definition of analysis. The most common definition is a set of methods for determining the best time to conclude transactions for the purchase, or sale of assets. In our case, assets are currency. And these methods are based on the analysis of the value trend, and in some cases on the volume of trading. Technical analysis is carried out to predict the upcoming price.
Recently, the large-scale computerization process has played a major role. You no longer have to draw the schedule yourself – now the program does everything. By the way, traders who trade in the Forex market through technical analysis are called Chartists. Experienced traders always have classic trend charts in stock, so the use of technical analysis is usually compared with charts. Next, consider the advantages and disadvantages.
Benefits of Forex Technical Analysis
The advantages of technical analysis include its widespread use by a huge number of traders. It is used because it is considered one of the most accurate. But it is, most likely, in the simplicity. There are many opinions on this subject. But most, simply visuals who look at the chart and analyze the situation on the market.
The next advantage is huge popularity and this is a proven fact. And it is easier to conduct such an analysis. Because, for example, for fundamental analysis , knowledge is needed, and not any there … Mathematics must be at the highest level. Knowledge of neural networks is required, and synergy should be known. Therefore, the technical does not compare with the fundamental. Yes, and is the technical analysis of the ideal option for quick trade in the market.
The next advantage is the fact that it gives a good profit. And if the trader will not jump over their heads and not turn the market into a casino – the opportunity to trade in profits will increase. Not at the very last place are the methods that, together with the technical analysis, give a good profit, and some of these methods do not require drawing charts of the foreign exchange market.
Not bad helps technical analysis and professional traders. Just a professional himself was once a novice. He will easily calculate all the steps that most traders will take in this or that situation. This allows you to analyze the direction of the trend. Well, apply, how should this analysis. The next advantage is that any information spreads on the market very quickly. You can calculate the time when this information will be seen by novice traders , which will give a profit due to their wrong actions.
Disadvantages of forex technical analysis
But besides the advantages, there are also disadvantages. The essence of technical analysis methods is based in predicting the price movement of trend lines. His behavior in the past is taken into account. Those traders who constantly carry out technical analysis, argue that the price movement can be predicted only in 15% of the hundred. The remaining percentage is due to the psychology of the traders themselves. If you guess the actions of most traders, you can make a profit, but if you make a mistake, you will lose.
Past methods with a trend line turn analysis into a kind of formality. All of these graphs, when analyzing, are considered classics and almost all use them as a template in trade. And nobody even thinks about the consequences. And after the deal was unprofitable, they immediately begin to blame force majeure. Then again begin to analyze.
The disadvantages also include the fact that knowledge requires those factors that will greatly influence the trend itself. But not all adhere to this and they simply do not take into account. And then, if everyone will be able to make a profit through the actions of the crowd, then the whole crowd will be in profit. Not every trader can instantly analyze a sharp reversal of the trend. This leads to a complete misunderstanding of the situation on the stock market.. And this, in turn, is losing trades. And then, this is just one of the ways to predict. And this alone can distort the event in such a way that trade will seem to be ahead of the curve. What kind of signal purity can we talk about after that? If we consider one of the factors of technical analysis on Forex – an axiom, you can find out the future value of the currency. But if you believe the fundamental analysis, the price moves freely here / there. That is, it is completely unpredictable.
And last – it is necessary to note the failure of technical analysis when checking advanced systems. But, despite the shortcomings, he has quite a few supporters. For example, more than 80% of European traders use it in practice, and financiers believe that such an analysis is based on three main factors. These are small deposits of investors, fast trading of investors and no desire to take risks. But still it is popular, and is considered the main strategy , of course, using other tools.