Technical analysis is the method of evaluating securities in the market by analyzing market trends and structures with trading activities. In the market, with the help of technical analysis, we can predict the next movement of the market by using chart patterns and price analysis.
Technical analysis is not a cup of tea. It is very easy to do. Mainly technical analysis uses charts and other things to identify chart patterns for making decisions on those patterns. Technical analysis is mostly used for day trading.
Most day traders use it for daily trading activities in the market. Trading with technical analysis is made more smooth because after making some grip on the technical analysis you can become a successful trader in the market.
The technical analysis is not hard but it is not quite easy. You need some time for more profitability in the market with the help of technical analysis.
In other words, technically refers to the analysis of the security assets with chart patterns, candlesticks, and trends. In technical all of the things depend on the price because in the analysis we are considering the price for analysis. Traders know very well technical analysis is the backbone of trading.
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Technical analysis is rafer Looking or chart patterns
Chart patterns are the main key to the technical analysis. The chart patterns are easily identifying patterns on the chart that indicate the market can reverse or continue from the last trading position. Watching the chart patterns you can predict the movement of the market.
In the market, many chart patterns are formed regularly. Chart patterns are usually two types one is a reversal and the second one is a continuation.
Here are some useful chart patterns.
- Head and shoulders: It is a reversal chart pattern that usually forms on the top or bottom of the market. its primary work is to suspend the uptrend. The head and shoulders chart pattern has a left shoulder, Middle head, and right shoulder. It also has a neckline for confirmation.
- Double Bottom: It’s usually formed on the top of the market.There the market on trend change mood. Beascaly it is a bearish chart pattern indicating the fall will come soon in the market.
- Flag: Mainly flags are two types. One is bullish or bearish and its primary work is the continuation of the market. Its forms many times into the market.
- Cup and Handle: It usually forms on the bottom like a rounding shape. It indicates the market will be in a bull mood soon.
- Triangle: It is a gold chart pattern. It has three types and it’s an all-rounder pattern in the market.
Understanding support and resistance
Support and resistance are very important concepts of trading. It’s also known as a very important thing for technical analysis. You can easily predict market movement with the help of support and resistance.
As you know on the support level there the buying pressure is expected high and many times the price is also returned from the same level. In other words, support is a level where demand is very high rather than supply.
Support level can be identified by the last swing low where the price has bound back two or three times.
Resistance is opposite of the support. On the resistance price stop for many times on a particular level. The resistance level has too much supply rather than deemed so the result is the downfall. On this level, the price can bounce back downward.
Resistance levels can be identified on those levels or areas where the price drooped many times.
Monitoring any technical indicators
Sometimes we hear about Indicators that are laggy or they provide fake signals in the market. Many traders use indicators to analyze the market in many ways, such as finding the trend, support, and resistance, and generating trading signals.
Many Indicators are laggy and useless. But you can make it easier with your study. On behalf of indicators, you can implement your study in live trade with the help of indicators.
Here are some common trading indicators the moving average, RSI, MACD, and many more.
While trading you must remember the indicators work on past formulas and there is no guarantee indicator will give you 100% accurate results. It just helps you how you can make your trading easy.
Analyzing the order flow
This setup is most important for technical analysis in the trading carrier. With the help of order, follow analysis you can gain insight into the market activity participants. You can predict the momentum of the market with the help of order flow.
Order flow also helps to find trends, and support resistance, volume, and momentum of the market. You can analyze order flow look at the ask and bid spread. You can know the higher price a buyer is willing to (bid) pay and the lowest price is (ask).
While analyzing the order flow keep in attention if in order flow a narrow bid-ask price indicates a high-level liquidity showing the market is running in a balanced market. If widespread may low liquidi and potential volatility can come. So thats why the Analysis of everything is most important.
