Efficient market theory implies that any even inconsiderable information can influence on the price movement. In these respect the following questions arise:
How fast can information influence on the price?
How might the market react on this or that report?
It is possible to reply on these questions relying on the technical and news analysis.
What is the main point of these methods?
Technical analysis involves forecasting the price movement usually with the help of computers and computer programs.
Graphs and other additional instruments are developed for the only purpose to find out the balance between support and demand in course of time.
Although there are many ways of technical analysis they are united by two theses:
- the history which is reflected in graphs is repeated;
- the price involves all the necessary information.
The majority of technical analysis followers are in the constant search for appropriate instruments which could help to estimate more precisely the state of the market at the given moment and its possible dynamics.
In comparison with the technical analysis which tracks down the interconnection between instruments and graphical figures, economic factors have a high priority in the news analysis, it might be the information about natural disasters, terrorist attacks, overall health and job placement of residents, etc.
A considerable role play the announcements of politicians and representatives of financial structures.
The analysis implies that the market instantly responds to the significant information.
Consequently, those who have an eye for it and can foresee the possible sequence of events have a chance to make money.
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