Technical Analysis is the process of identifying the trends so as to produce an informed prediction of the changes in the price of financial value in the future. Technical analysis is very potent in any trading activity you want to perform. But it is even more useful when dealing with crypto because they are very volatile.
This analysis will give you an insight on the behavioral changes of a given asset in the market at a given time. It will enable you to make decisions depending on mathematical evidence that is reliable. By using this analysis traders you can make future market predictions with a higher certainty of making the correct predictions. before you start your trading journey with MGC Logic it is impotent you will know Technical analysis to its core
How it Works
Technical analysis makes use of patterns that are made from algorithms, graphics tools, and market indicators to forecast the trends in the future. To be able to achieve this, the analysts have to have these three assumptions:
- The price should be a reflection of the overall stability Analysts have to believe that higher prices for commodities are as a result of high demand for the value while low prices mean that the asset does not have a lot of demand compared to its supply. Other factors are also involved however, but the main determinants are the forces of demand and supply.
- Assuming the price will move in trends – This is basically assuming that the prices for a particular good or valuable will either go down or upwards. The analysis is dependent on mathematics so it is not expected that the prices should move sideways.
- History re-occurs – Here analysts believe that if a certain instance or change has happened and under specific conditions, then the same thing will happen once more when the specific conditions appear once again in future. This analysis is usually uniform. This means that it must be done the same exact way on any value unless you want the results to vary.
How Technical Indicators are used
Technical indicators are also known as mathematical tools that assist analysts to make a comparison on the assets. They pick different variables that are being handled in a way that the valuables can be are comparable using numerals. In a case where two assets are highly flexible, technical indicators will enable us to choose the preferable option over the other. The indicators give analysts the power to look at two or more assets more keenly and with some ease instead of having to look at them independently.
There are four main categories of technical indicators as follows:
- Volatility indicators They strive to indicate the movement that is expected over a given period of time in the market. High price fluctuations are indicated by high volatility.
- Momentum indicators These technical indicators will observe movements in the market keenly and show analysts the magnitude in which the prices are moving.
- Trend indicators Trend indicators give the analysts an overview of the market. These indicators will us how prices are doing in the market. They will indicate whether prices are going down or rising.
- Resistance and support indicators, They show kind of a buffer area. This is normally when prices do not go below or above a certain point in the market.
Technical analysis, in addition to rest of the our Trading Academy materials, will enable you make accurate decisions and predictions thereby minimizing the risk of losing your money. It is very vital that you acquaint yourself with indicators and tools that are involved in technical analysis.