If you look closely at the world of trade, it revolves entirely around “predictions”. Every trader or investor would like to have an idea of the result (technical analysis) for a certain security or share before parting with his hard-earned money!
In fact, experienced veterans are able to correctly predict the ups and downs of financial securities. Here’s how to make loads of money!
But this “predictability” is lacking in most people. Even experts can be confused sometimes, forget newcomers to this community! Therefore, a new tool called “technical analysis” has appeared on the market to help with such issues. As the results of its use have proved to be favorable, more and more traders and investors are turning to it.
Let’s take a look at all the features of this new tool–
(1) The correct definition of technical analysis is “the ability to predict a particular financial market security”.
(2) This type of analysis revolves around the actual market movement; this is not the case with fundamental analysis. Factors related to politics or economics are eliminated, although they influence market movements.
(3) He is looking for patterns or trends that may 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 advisable to make a fundamental analysis as well. Comparing the results of both will give a double advantage of accuracy.
(5) How is fundamental analysis different?
If a fundamental analysis needs to be made for a particular company, it includes factors such as how the money is managed by the company, how it has performed in the past and how stable the current government is in terms of currency trading. Thus, this analysis examines the reasons for market movements.
Technical analysis only deals with how the market will actually move. The current or past presentation of the company, how it takes care of its money – all this is irrelevant!
(6) Everything that claims to be perfect is, of course, 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 use the help of a number of 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 needed for the purposes of monitoring the results. The software must have these features – real-time data streaming, scaling features so you can clearly see the changes and charts on which to base forecasts, among others.
(9) There is a lot of software on the market, but it is advisable to choose one that studies how a security has performed in the past and accurately predicts its future.
(10) How are market models discovered?
Each day must take into account the starting 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. Daily data collection leads to setting a model 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 software. This type of tool is intended to serve management only.
(12) Finally, whatever the software, whatever the technical analysis, the ultimate decision maker is the “man”! Yes, this tool with its software gives very good guidelines, but the instinct or the sixth sense must play a bigger role if the trader or investor wants to achieve great success!