1. Introduction to Technical Analysis
Let's start with the underlying assumption of technical analysis. In this case I would take an extreme approach so that you can understand how a technical analysis used in obtaining the gain on forex trading. Of course, in practice it is not so. You can combine both analysis (fundamental and technical) in order to obtain a trading system that works best for you.
The chartist (parties who perform technical analysis), believe that they can know the patterns of movement of exchange rates in the future based on the observation of exchange rate movements in the past. In short, they hold this jargon: "History always repeats it self." This philosophy is of course contrary to the fundamentalists where investment decisions on the value of a currency based on economic fundamentals, monetary policy and the country concerned.
The main weapon is the technical analyst charts (chart - that is why they are called chartist). Through this chart they can see the ongoing trend, the span of the trend, the volume of transactions and psychological levels that exist. If you have been able to know these 4 things, of course, a great advantage will soon be flowing into your pocket. Let me re:
1. Trend Ongoing
2. Volume of transactions
3. Levels of psychological (support and resistance)
4. The time periods occur.
Yup, that's it. Indeed, the aim of the chartist is predicted to four things. But now the question is how accurate our ability to predict the price? Well that's what had to be constantly on the grindstone every day. No single method is perfect both fundamental and technical. Experience and yourself holding a central role here.
Technical analysis itself has some basic analysis section or different. Broadly speaking, the technical analysis is divided into several large branches, namely:
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Does technical analysis have weaknesses ?? Of course. As I said just now, no one is perfect. Let me sarikan second weakness of this analysis in tabular form:
Weakness in Fundamental Analysis
It takes time to obtain the information.
Often it is subjective because it involves a lot of opinions.
Fits better with the long term trading period.
Difficult to apply in inefficient market.
Weakness in Technical Analysis
It requires a lot of data to support accurate prediction.
Highly dependent on the ability chartist. Each chartist have different methods and each is not necessarily suitable to one another.
Well that's it for the introductions on technical analysis. In the next section we are directly acquainted with the chart. You definitely do not want too much information that eventually even make you dizzy is not it?
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