HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Newbies' Guide To Technical And Fundamental Analysis


The most important goal of every trader is to make a profit by investing in various assets and trading instruments. Successful investors make in-depth, extensive research of the market, which generally consists of technical and fundamental analysis. Both methods display market conditions, but they approach the market from different angles. Although technical and fundamental analysis can be used independently, they can be also effectively combined.

Technical analysis and its applications

In this series of articles, we will consider the general points of these two approaches, highlight their differences, and consider how they can be used in trading. In today’s article, we’ll take a closer look at the technical analysis, the next post will be devoted to fundamental analysis.

Technical analysis

Technical analysis is used to identify the most likely scenarios and price movements in the future based on past activity. The trader examines how the price behaved earlier using multiple time frames. This approach often includes volume and cluster analysis, as well as other statistics. Japanese candlesticks are one of the most common tools used in technical analysis. Candlestick charts display various price movements over time, displaying the high, low, open, and closing prices of a trading instrument for a specific period. When analyzing candlestick charts, traders look at the combinations of candles, their order and their interaction with each other.

The only difficulty here is that there are dozens of such chart patterns. Remembering all of them and being able to identify them the chart may be tricky even for seasoned traders, not to mention beginners.

Technical analysis tools include indicators and oscillators. An indicator is a program configured according to a set of parameters. It averages the price activity for a certain period which allows traders to forecast the further movement of an asset in the future. The Moving average is a classic example of a technical indicator. Oscillators are used when a trading instrument moves in a narrow range, showing no signs of a definite trend. Oscillators help the trader determine the asset’s oversold and overbought zones. The most popular oscillators are RSI, MACD and Stochastic.

Traders apply technical analysis tools to identify the right points to enter and exit the financial market. To do this, they can use signals of a single indicator or a combination of indicators. For example, MACD and RSI are often used in conjunction. MACD helps traders spot the changes in overall market sentiment, while RSI is used to search for a specific entry point.

Technical analysis is available to anyone. Having learned a couple of simple indicators, make sure to test them on a demo account first. Trade for several months to see if the indicator performs as planned. 

Technical analysis is far from perfect and it does not guarantee a 100% gain. Indicators often provide false signals, so there is no perfect indicator, based on which one could make accurate market forecasts. Some technical analysis tools work well during a strong trend, others when the market moves sideways. Some perform better on smaller time frames, others on news releases. The best thing to do is to put indicators from different indicators together, so that they complement each other, thus creating your own trading system. Knowing which indicator to use and when is a very important part of your trading, that can improve your performance.

#source


RELATED

ADX: Find the Strong Trend

In a wide variety of indicators that provide different signals, it's almost impossible to find the one that defines the trend's strength. It's vital to know whether the trend is stable or not, especially during...

Fundamental Analysis Explained: A Trader’s Tools For Profitability

What is Fundamental Analysis? There are many ways to define fundamental analysis, but breaking it down to as simple terms as possible, it is the study of the underlying...

Mastering The 50-Day Moving Average And Its Applications in 2023

In the ever-evolving realm of financial markets, gaining a deep understanding of various tools and indicators is essential for deciphering price trends and making informed decisions...

A matrix to understand the Gold market

US investment bank Morgan Stanley produced a research note yesterday detailing that they see a period where real US bond yields rise in the near-term...

Depth Of The Market: Definition And Meaning

Depth of the Market is a special technical indicator developed for the MetaTrader 4 terminal. It is designed to monitor the current price movement and also to determine the supply and demand zones...

Support and Resistance Levels: Comprehensive Overview and Practical Approaches

Support and resistance levels are paramount concepts, pivotal in navigating Forex and various financial markets. These levels underpin myriad trading strategies and form the foundational framework...

How to Calculate the Value of One Point in Forex

A point is a very important concept for calculating possible profit or loss in financial markets. When conducting transactions, you need to clearly understand how much...

Three technical indicators you should know about

Seeing a list of indicators, you might easily get lost. This article will help you learn about 3 essential indicators that will help you define your trading strategy for any time period...

Strategy session: Why momentum is a short-term traders best weapon

We can approach trading in a very similar vein as many do in Blackjack or how a casino operates, in that we can think in probabilities and potentially forge, and exploit an edge...

Technical Analysis Tools

Read on to find out about some of the most popular technical analysis tools that traders can use, such as Bollinger Bands, MACD, and RSI...

Assessing the US 100 Index: Dead Cat Bounce or True Bullish Turnaround?

The US 100 stock index (cash) has garnered significant attention in recent trading sessions. Notably, this past Wednesday, the index showcased an upward momentum...

Beautiful Signals of the Butterfly Pattern

The butterfly pattern. It sounds nice, doesn't it? However, the real hides many difficulties for traders, especially for newbies. It's not a common trading tool...

FTSE 100 Predictions for 2021 and Beyond

Stock market returns in 2020 were eerily similar to what happened in 2009. We're seeing some strength emerging from a deep stock market recession. Even though...

How to Use the US Dollar Index (DXY) in Trading

The US Dollar is the most traded currency in the world. It is used as a currency of the majority of international transactions while also being part of the most popular currency pairs on the Forex market...

Stop Loss In Trading: How To Say No

Almost all experienced traders of the forex market agree that it is necessary to set stop losses in any style of trading. Beginners, newcomers to the market, often neglect this rule...

What Are Order Blocks In Forex? Unraveling the Impact of Big Market Players

In the vast and intricate world of Forex trading, the presence of order blocks plays a crucial role in shaping market dynamics. Introduced by large financial institutions and central banks...

Bullish vs. Bearish Market: How to Distinguish

In trading, you should focus not only on learning new strategies and indicators but also on discovering the terms that are widely used within the trading community. This will help...

Which indicator is best for forex trading

Success is what everybody wants when first enter the forex market. Just for success they do learn how to trade themselves, hire brokers and cooperate with each other...

The Double Top Pattern: An In-Depth Guide to Mastering a Timeless Reversal Signal

While it's often claimed that markets are unpredictable, there's a method to the madness. Certain price chart patterns like the double top pattern offer a systematic way to read market movements, acting as historical footprints that signal future trends...

CFD Trading Simplified: Strategies for the Modern Online Trader

What if you could trade the global markets with more flexibility than ever before? With CFD trading, you can! Contracts for Difference (CFDs) stand out as powerful instruments within the Forex markets, providing the possibility to capitalize...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.