Many people have been debating that technical analysis is just a journey into the occult where people are led to believe that this kind of tool to predict the outcome of a financial market is just plainly a fraud and very risky to follow. Some say that technical analysis is just speculation, a guess as you may want to call it.
However, there may be some facts that technical analysis may have some science mixed in it.
Understanding how technical analysis works can be easy. First of all, there are two kinds of analysis done in the financial market. The more accepted form of analysis is called fundamental analysis.
Unlike technical analysis, fundamental analysis is concerned why the market moves. A fundamental analyst will be concerned about things like political factors and economical factors. They will often watch the news about how a particular company is managing their money and how a stable a government is when it comes to dealing with Forex or currency trading.
In technical analysis however, it is just concerned about the financial market movement itself. It does not concern why the market moves and it doesn’t care about the news, economical factors, and the political factors.
Technical analysis focuses more on the lines that you may have seen moving or zigzagging in Wall Street. If you’ve seen the business news, you may have seen bars, or lines fluctuating up and down. This is where a technical analyst concentrates.
The theory behind technical analysis is that it will try to predict the future by basing from the past movements of a particular stock or currency. It may seem very hard to do but it detects patterns of price changes, buying and selling strength, the volatility and other things concerned.
There are so many indicators a technical analyst will have to consider in order to arrive at an accurate prediction of where the market will go next in the future. It may predict where it will go next year, in a few months, in days and even in hours.
This kind of technique is relatively hard to master and you will need a software in order for you to successfully predict the outcome of the market in a single trading day.
It is a fact that technical analysis is one of the biggest things in the financial market today and many people try and attempt to do it but few have been successful in fully understanding how this method works.
Technical analysis predicts the future outcome of a particular security by studying the past performances of the particular security and finding a trend or a pattern in it. Once an analyst found a pattern, he or she will be able to tell you what the next move will be.
It may seem very hard to believe and hard to trust but if you try and get some time to study it, you will see that there is a fact in technical analysis and it’s just not some guess.
However, you should also consider that technical analysis isn’t always accurate. To make sure of the findings, you may want to study both fundamental analysis together with technical analysis. By comparing this two, you will have something to guide you in your decision making.
Whatever method you choose, always remember that technical analysis or fundamental analysis will serve as a very useful guide to your money making venture in the financial market. You should also learn how to trust your “gut feeling” instinct.