Technical Analysis
Technical Analysis is an analysis using historical price and volume data to predict future price movements. Such price and volume information is displayed in the form of charts, and various technical tools are used for analysis, such as indicators.
The foundation of technical analysis is based on three assumptions:
- The price discount everything
- The price moves in a trend
- The price will repeat the same pattern as in the past.
Therefore, with the above assumptions, technical analysis is predictable and statistical. But this is not a confirmation that the price will always move in that direction.
Technical Analysis can be applied to price analysis of financial products in all financial markets such as stocks, bonds, commodities, futures, currencies and cryptocurrencies.
Therefore, technical analysis is the principle that there are no boundaries between the financial markets. But there is something to be careful of. Technical analysis is effective when it comes to markets with good liquidity. Otherwise, with a small amount of liquidity, the price can be controlled, resulting in the price moving independently. This makes technical analysis not as effective as it should be.
There are two main forms of technical analysis:
- Price analysis only (bare chart) such as Price Action, Chart Pattern, Support-Resistance, Trendline, Fibonacci and Supply-Demand etc.
- Analyze using indicators such as Moving Average (MA), Moving Average Convergence Divergence (MACD), Relative Strength Index(RSI), Stochastic (Sto), etc.
There is no right or wrong in technical analysis. There is only the word “probably” because no one can foresee the future in which direction the market will move. Therefore, technical analysis is a matter of “probability” and “statistics”, so traders need to keep in mind that there is always the possibility of trading mistakes. Therefore, risk management is always required before trading.