Fundamental and technical analysis will extract from the market, what you need to make good decisions. Learn how to apply each of them, and offer yourself what it takes to create a successful trading experience.
Technical Analysis - Chart based
Fundamental Analysis - News based
Sentiment Analysis - Trader's risk appetite
Technical analysis considers price movements and past patterns they create. It is believed that under the same circumstances, assets behave the same, producing the same trends and patterns. There are three assumptions when it comes to technical analysis: the price of the asset is automatically influenced in economic conditions, interest rate changes influence the buyers and sellers behaviour, and trends tend to repeat themself.
“Technical analysis covers a wide range of data and variables, from prices to volume and market capitalization for any asset. It is mainly related to stocks. Its purpose is to bring a taste of the future prices in the present. There are different kinds of charts which need to be analysed to get the information needed to make a decision. Bar charts, line and candlesticks will provide a wide range of information.
There are also technical indicators, like the most used one, the moving average for different timeframes. There are support and resistance levels, which can be inserted as a line on a chart to show the levels at which the stock price faces a resistance when it is trying to go up, and it is supported to not go lower.
Every asset in the market will be discounted with the time
Technical analysis is based on price movements of the asset, not considering outside factors, since it assumes that all outside factors are already reflected in the price. So, all needed is the examination of the price.
Prices move in trends, and the future price goes after the trend
There are many different techniques to identify the trends, but like weather forecasting, technical analysis doesn’t take into consideration all the possible influencing factors. Instead, technical analysis provides investors with what is likely to happen with the price directions in the future.
History repeats itself. Same circumstances cause the same reactions
The keystone of technical analysis is the idea that history repeats itself. Technical analysis uses historical prices data to forecast the future prices. Charts tend to form certain patterns that tend to repeat under the same market pressure.