Technical analysis is the study of statistical trends, collected from historical price and volume data, to identify opportunities for trade. Technical analysts observe patterns of price movements, trading signal and other analytical tools to evaluate the strength and weakness of an asset.
Technical Analysis can be applied to any security with historical trading data such as Cryptocurrencies, Forex, commodities and stocks.
Advantages of technical analysis
The advantages of technical analysis are that it can be applied to virtually any trading instrument and in any timeframe. Technical analysis can be used to analyse anything from stocks, commodities, interest rates or forex. You can also apply technical analysis from a short term perspective to a longer term time frame. In fact, it can be applied to a chart ranging from minutes on an intra-day time frame to weekly or even monthly time frames.
It is important to understand that technical analysis can be used as a standalone method or it can be incorporated with other methods such as fundamental analysis or market timing methods.
Why is technical analysis important?
Many traders and investors use technical analysis to inform them of the direction of markets. Markets are not completely random and if you see a pattern emerging, the chances are many others can too. This makes it almost a self-fulfilling trend. Traders and investors help to create the patterns we see in market prices.