Image default

What is Technical Analysis?

Technical Analysis is a widely-used term in stock markets and financial investment strategies.

Technical Analysis defines analysing prices and capacity trends to forecast the future price activities of assets. This type of analysis is gained by applying scientific calculations known as the technical indicators. to the past and current value and volume data of the assets to detect and analyse trends.

Although this data can all be measured algorithmically, it is communal for predictors to apply these indicators to charts.

General technical indicators used by technical analysts include terms which may be familiar to you. These are: Relative Strength Index (RSI), Moving Averages (MA), Elliot Waves (EW), and the technical trends of Ichimoku Cloud which are discussed in great detail the third section of this book.

Why Technical Analysis is Important?

The motivation behind technical analysis is as follows:

  1. What has occurred in the historical events that can provide us with an idea of what is likely to happen in the future. Obviously, we cannot see the future but the technical analysis allows us to calculate the odds and predict it.
  2. The next trend of investors would definitely follow the trend of the last investors.
  3. Human behavior can be predicted in the markets to some extent.
  4. Therefore, reviewing features like past volume and price trends along with the current volume and worth, can tell us about the probability of upcoming cost and volume trends.
  5. Since the points given above are true, they can aid us in plotting everything on a chart to getting a rapid and easy-to-understand visual of possible paths the price might follow.

It is important to note that Technical Analysis doesn’t examine the basics of an asset. Instead, Technical Analysis revolves around using charts and technical indicators to better forecast the probability of short-term, medium-term, and long-term trends grounded on historic and current value and volume data. Here we have to emphasize that technical analysis is not about inevitability, it is about trying to search for future prospects based on past trends. An experienced analyst will never draw a definite conclusion, they merely plot out the events that could occur based on the data, and then consider the possibility that each conceivable set of events has of happening.

Types of Analysis

Our topic of discussion is the Technical Analysis, so without going into detailed explanations of the Fundamental Analysis and Market Sentiment Analysis, we will briefly define them.

Fundamental Analysis: It is the examination of basics, for example in cryptocurrencies, mining financial gain, business fees, operation speeds, and many others.

Sentiment analysis:It is the clarification and cataloguing of sentiments within the markets. Sentiment analysis allows industries to classify client sentiment toward products, brands or facilities in online discussions and response.

The details given above are some of the very basic information about technical analysis. It is a very complex topic that needs to be studied and evaluated from various aspects because it has applications in numerous sectors.