Technical Analysis
Technical analysis is the analysis of movement based on a mathematical calculation (formulas, graphs, charts, etc.). By combining the movement of an instrument with specific mathematical formulas. To present a picture or predictions of the future. Now that you have to be careful and watch was the words, images / predictions, so accuracy is not 100%. The amount of accuracy is at the level of art and distinct from each trader. The more you diligently honed formula, evaluating, combining, etc. will become more precise.
The goal of traders using technical analysis, among other things:
1. Volume of transactions
2. Trends
3. Levels of psychological (support and resistance)
4. Period of time that occurred.
This technical indicator created by many technical analysts, and if the collected amount can reach 250 more, with a variety of purposes. And with the level of complexity is different. But little input you do not need to use all (because it was impossible too), just use whichever you really understand it, a little better and simpler, but you master and know where the strengths and weaknesses.
Indicators apply the principle of mathematical and statistical sciences. So the question, well I must be dong statistical science? The answer is not necessary, the application program forex, most of them have been able to provide a direct indicator that you apply in the charts. For those of you who have advanced (forex & statistics) you can also create an indicator based on your tastes. Although this congenital indicator can already be directly applied and used on the graph, you still need to study the usefulness and function of the indicator.
Several indicators are commonly used:
Broadly speaking there is three types of indicators are:
1. Price Momentum Indicator (Oscillator): This type is used to identify indicators of oversold or overbought situation. Momentum indicators are also used to see whether a trend will still continue or fizzle out.
Example indicators:
- Stochastic Oscillator
- Relative Strength Index (RSI)
- CommodityChannel Index (CCI)
2. Following Trend Indicator: This indicator is used to identify the beginning and end of a trend or when a trend will change so that can know when the best time for the opening and closing positions.
Example indicators:
- Moving Average (MA)
- Moving Average Convergence – Divergence (MACD)
- Directional Movements Index (DMI)
- Parabolic SAR
3. Volatility Indicator: This indicator is used to see the views of market power price fluctuations within a certain time period. The market is said to have high volatility when going up and down price movements are sharp or very volatile where there is a big difference in price between the highest and lowest prices.
Examples of indicators: – Bollinger Bands
The name of technical indicators are also a lot in common with the name of its discoverer, example an indicator called Bollinger Bands created by John Bollinger, a Jewish Technical Analyst.
Fundamental Analysis
- It takes time to obtain information.
- Nature subjective because it involves a lot of people’s opinions.
- Difficult applied to an inefficient market.
Technical Analysis
- Requires lots of data to support accurate prediction.
- Required proficiency trader (read chart)
- More suitable to be applied in the long term trading period.