Benefits of Technical Analysis

Benefits of Technical Analysis

Technical analysis focuses on price movement which is easily spotted at a glance through the charts.

Technical analysis applies to all charts, whether they are 5-minute charts for day trading or daily charts for longer term trading.

Trends are easily found as some indicators can quickly display a currency or security that is exhibiting a trend.

Patterns are easily identified as charts displays previous patterns and help predicting future ones, as the market tends to repeat itself.

Charting is quick and inexpensive as such technical indicators and tools are available via the net and they are automatically represented according to built-in calculations. Most brokers nowadays offer them to clients as part of their package.

Charts and indicators can provide a huge amount of information in only a few moments. There are more than fifty kinds of indicators and each provides information on different aspect of how a currency or a security is moving.

How technical analysis applies can be different for each trader. Every trader has their own interpretation of where they see trends and support. They also have their own ideas on setting up their indicators. The indicators and charts can be simple or sophisticated as they can provide only the most basic information on a trend or support and resistance, or go much deeper to provide information on the strength of a trend, how momentum is building, and whether formations are developing that the can be traded.

It is important to understand that technical analysis is not an exact science, and may not always give accurate predictions of the market movement; however, it is very useful in forex trading. It makes up only one portion of what you need to know when trading, but it is a very important thing to learn. Understanding technical analysis will give the charts some meaning when you look at them and help you understand why certain price movements occurred.