Technical analysis is the observation of historical price movements of a value.
These results are used to identify historical patterns and to discuss possible future forecasts.
Technical analysis (TA) is a frequently used instrument in trading with various assets. This tool is particularly popular in the trading of crypto-currencies, as pricing is based solely on supply and demand of market participants.
As different as the approaches used to analyze a price trend may be, there are a few common denominators.
Principles
The only decision basis of technical analysis is the price trend of a value. This reflects seamlessly the historical investor behavior. It reflects moods and decisions as well as rational and irrational decisions. The current price is the equilibrium between supply and demand of all market participants. This is a weighty factor that reflects all opinions and decisions.
Price movements are not purely accidental. Trends are created and trading is preferably carried out with the development trend (trend is your friend). The chances of being successful within a trend are better than going against a prevailing trend. The trading volume confirms and reinforces a trend. An estimation functions according to a trend only with brisk trading activity, i.e. with meaningful price movements.
The technical analysis deals exclusively with the price development. Fundamental data is not important. Nevertheless, or precisely because of this, the analysis of prices is not an exact science. Due to the mass of indicators as well as formations and their correlations, price charts can be interpreted in many ways. Even the selected time interval can provide different results on the possible future course of a price.
The technical analysis considers probabilities
A forecast is generated from historically recurring patterns.
"Forecasts are based on probability, not on a result that can be expected with certainty. The aim is to identify trading opportunities with low risk and a potentially high return profile."
The approaches to technical analysis and its interpretations are diverse and wide-ranging.
There is a huge variety in strategies. It is therefore important not to cram in strict patterns, but to find the best approach for you personally. The starting point for technical analysis is to understand how the most popular price charts are presented. The identification of trends, resistances, supports, formations and trend reversals are further components of TA.
