The importance of the technical analysis for a trader.
Technical analysis is considered as a universally acknowledged approach to study the financial market processes in order to provide a very precise, as far as it is possible, forecasting of the currency movement.
Making a technical analysis a trader usually relies on the fact that the financial market has its own memory and consequently the future currency movement is under the influence of the objective laws of its behavior in the past.
On this basis specialists make certain conclusions.
Technical analysis is based on the following postulates:
- The market takes everything into account and the price of this or that asset is the result and a through reflection of all forces that influence on market processes.
- Price movement is characterized by certain tendencies. The market development dynamics includes periods of growth and fall in prices and the main tendency develops inside each of these periods the effect of which lasts until the price movement changes its direction into the opposite.
- The market situation, which took place in the past, often has a high recurrence rate. In order to forecast what to expect in the future it is necessary to study the past. Studying price graphs one might notice that certain configurations appear quite steadily at different times and in different markets. This fact has quite a logical explanation: such kind of recurrences are the results of certain behavioral stereotypes which perform an inherent part of psychology of human.
Using evaluation data of the technical analysis one can forecast the market movement with a high degree of probability.
Exactly this forecast is the most significant element of almost every trader’s strategy in Forex.
On basis of the forecast a trader takes a final decision to open this or that position in the currency market, decides to buy or sell an asset, determines the most appropriate moment to make a transaction.
Technical analysis allows every trader to receive trustworthy forecasts of the price development in the currency market and it concerns almost any financial asset.
‘Analysis with Strategy’ becomes ‘profit’
However, it is important not only to have information but also to use it appropriately applying efficient trading strategies.
In this case a trader can make the right decision which will allow to get a maximum profit from the transaction.
Thus, technical analysis is a very important aspect for every trader which helps to take right actions in the market, open positions investing personal funds in the right moment choosing the most efficient financial instrument.
Having mastered the skills of the technical analysis, a trader may count on the profitable outcome of trading in the currency market and the risk of losses will kept to a minimum.
Technical analysis undoubtedly contributes to a high probability of the trader’s success in Forex market.