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General principles and purpose of the technical analysis
Forex Technical Analysis (Technical Analysis) - a study of market dynamics, often through charts to predict future price trends. Price - the balance between supply and demand for this currency.
There are three basic postulates upon which technical analysis forex:
1) The course addresses all the financial instrument (market takes into account all).
The essence of this assertion lies in the fact that all the possible factors that may affect the value of the analyzed tools - economic, political or psychological - were already covered by the market and are included in the price. From this it follows that the study of the price chart - that is all that is necessary for prediction. Despite some simplification of the real situation, since it does not take into account the shift in time of receipt until its impact on the price at time intervals of several hours and more difficult to challenge this position.
2) The price moves in one direction (subject to price movement trends.)
Trend - a trend (Trend) - sustained price movement (the course) on the market in a certain direction.
This assumption is the basis for trend analysis and serves as the core of technical analysis. There are three types of trends:
"Bullish" (rising) trend - prices go up. The definition of "bull" comes by analogy with the bull, climb up on their horns price; "Bear" (down) trend - prices are moving downwards. In this case, the bear as it dominates the price for themselves, leaning down at her with his whole body; side - a definite direction of price movement either up or down there. Usually this movement is called "flat" (flat), at least - "yuncoy" (whipsaw). Immediately be noted that the long flat pricing is a harbinger of storms on the market - a strong price movement in one direction or another.
As a general rule, prices do not move linearly upward or downward. However, the bull market prices rise more and faster than the fall. However, the exact opposite happens in a bearish trend. Thus, if the trends are there, then they can apply the basic laws of motion:
current trend is more likely to last than to change direction trend will move in the same direction until the wane.
3) History repeats itself.
The essence of this assertion is the immutability of the laws of physics, economics, psychology, in different historical periods. Consequently, the rules that they acted in the past - and act now, and will act in the future. It is this statement and provides a basis for technical analysis of reality and predict the future. The objectives of the technical analysis forex
1) Assess the current trend. The options are:
ascending down flat.
2) Assess the duration and period of validity of this trend. Can be:
short-term trend medium-term trend long-term trend start a trend maturity trend death, the completion of the trend.
3) Estimate the amplitude of price fluctuations in the current direction (the deviation of current prices).
slight change of course (the narrow corridor); strong change in the course (usually change by more than 1-2 per cent per day or more than 0.3-0.5 per cent per calendar hour).
Defining these three components of the price dynamics, we can, with some confidence to buy or sell a financial instrument under study.