An Introduction to Technical Analysis - Eaglesinvestors

If you want to make sure that your long-term financial targets are met, you need to have several things in mind. First of all, you would have to consider your investment objectives.

What is it that you want to achieve? Is it a second income? Is it becoming the world’s greatest stockbroker?

Here we will begin a sequel on the basics of Technical Analysis. We will start with the core principles up to advanced models of technical understanding.

Whatever your goal is, there is only one person you need to convince, yourself. Secondly, you MUST prepare yourself, a good mix of both fundamental and technical analysis will help you achieve your goals. 

Once you have done that, a second very important step is to carefully consider your investment capabilities. How much are you really willing to put into this. Not all the financial products are suitable for all investors. Forex trading is definitely something worth your while as long as you remember your own limitations. Mastering the skill of reading price movements will help you achieve whatever goals you have set on yourself.

Part of the basics of Forex Education is knowing how a stock or Forex chart works.

Included in your trading strategy is reading and understanding financial analysis. Fundamental analysis is where the future value of different securities is calculated depending on external factors, such as the financial performance of the company. Based on this analysis, we could say that mainly news affect the price action. On the other hand, technical analysis studies the evolution of a market mainly on the basis of graphics, with the aim of spotting the birth of different tendencies.

When one learns to trade, technical analysis answers the question:

“When does one have to sell or buy a security?”

Even if the fundamentals of a value are good, many technical analysts do not recommend investing in a value whose graphical configurations are oriented downwards.

Foreign exchange´s technical analysis is based on a historical exploitation of the prices of the graphs. Through supply and demand, the evolution of a price chart is a reflection of various factors. Among them we find, the level of interest rates, the results of companies, the craze or the disaffection for a title.

Prices follow trends

The tools of technical analysis aim to eliminate the fluctuations reflecting the hesitations of the investors to reveal significant movements.

Investment Gurus have repeatedly said that the story tends to repeat itself, technical analysts consider that the key to the future lies in the past.

Do you understand a stock chart?

A stock market chart typically consists of the opening price, the closing price, the highest and the lowest prices the security has reached that day. It also includes information such as the bid and ask price. This information helps you understand the strong elements that characterized that session. They will give you a general idea about the buyer and seller´s behaviour towards that security.

Several types of graphic representations are possible to illustrate the history of the price of a title where the continuous curves join the last observed prices for each period.

We find two main charts that will help us learn technical analysis.

  • Bar charts are graphs composed of a succession of bars. They highlight the volatility of the daily price and take into account the first and the last price as well as the highest and the lowest.
  • Japanese candlesticks, also known as candlesticks, focus on opening and closing prices.

Japanese candlesticks were invented in Japan in the seventeenth century to monitor changes in rice prices. The graphical analysis applied to the stock market allows us to answer the following question: “Does the value represented graphically shows signs of purchase or sale?”

However, Forex learning and the use of tools such as graphic analysis requires the grasp of basic principles like:

  • Detecting a trend
  • Being able to discern clear buy or sell signals
  • Interpreting the importance of the volumes traded

Do you know how to detect a trend?

technical analysis

In FX education it is important to learn to detect a trend. It is like answering the following question: according to the stock market chart of the company examined, can we identify buying signals or, on the contrary, sales signals?

Trend tendencies, such as support or resistance, allows the investor to set purchase or sale thresholds. They form an upper and lower boundary that marks the evolution of a trend.

A great way to practice everything you learn over the different articles is by creating a demo account with your preferred broker. Follow us for more, and you will be ready to trade in real time, real soon.

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