In simple terms, technical analysis means that one looks at price movements. Price movements that occurred in the period then become the basis of analysis of price movements in future periods.
The main objective is to observe the price chart:
1. can quickly find the price trend
2. can predict the likelihood of time and distance trend
3. can take advantage, when to enter and exit the market.
In the development of modern investment, investment decisions seem to rely more on technical analysis than fundamental analysis, especially for short-term investment decisions such as forex. According to Meyers, this is because, the price movement of securities, including currency-is no longer random, but repeatedly and form a certain pattern that can be identified.
Prior to use in trading, it's good to understand the basic principles of this technical analysis. Among experts there is no mutual agreement on a number of principles that must be met. However, there are at least three principles that can be used as a basis for understanding the technical analysis, namely:
1. Market discounts everything
The first is that technical analysis market is a reflection of everything. Changes that occur in the market price is the result of the action (purchase or sale) are taken by actors with diverse backgrounds, information, knowledge and emotions are different.
Through the observation of price changes that occur in the market is enough for an analyst to predict subsequent price movements, technical analysis.
2. Prices move in a trend
Technical analysis prices tend to move in the same direction during several periods. Movement can be raised, lowered or moved in a certain area (sideway) form patterns whose effects can be recognized. Technical analysis does not believe that prices move randomly, so it can be estimated. If the price of an asset moves up at the end of this week, then next week is likely to continue the movement, to mark the end of the increase in technical analysis emerges clearly.
3. History repeats Itself
The patterns of specific technical analysis which was formed by the movement of prices that occurred in the past will happen again and cause a similar effect in the future. Technical analysts believe that the behavior of human transaction that is driven by information, desire and emotion en masse tend to be repetitive, such as technical analysis of mass crowd who do the queue due to the scarcity of kerosene at this time will return to repeat the behavior in the future when faced with similar situations.
Source : Google
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