Stock Technical Analysis in Australia has been used by traders, analysts and investors for centuries in the stock markets, it has been widely accepted by the financial industry (management company, etc.), regulators and the academic community, especially in business schools where aspects of behavioral finance are studied.
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Although technical analysis follows predefined rules and principles, the interpretation of the results is usually subjective.
In other words, although some aspects of this discipline are based on the use of mathematical formulas and models following very specific rules, the interpretation of the results sometimes differs from a trader due to his experience and his trading style.
Technical Analysis: Definition
Technical analysis is a set of processes that is used by traders in trading rooms, this discipline aims to analyze the evolution of the price of an asset based on the use of different technical indicators. or from graphical configurations.
Indicators, just like the graphic figures that can be observed on the price curve of a stock market asset, make it possible to identify trading opportunities for purchase or sale, measure volatility, detect the direction of a trend, etc.
In technical trader terminology, this charting approach to studying price is also referred to as chartist analysis.
Technical analysis applies to all types of financial products listed on financial markets, whether it is the stock market, forex, the cryptocurrency market, the commodity market or a stock index.
What Is Technical Analysis?
Technical analysis consists in analyzing and forecasting the evolution of stock prices on the stock markets, using the history of the graphs of an instrument.
It postulates that if a trader can distinguish trends in the stock market, then these can be a relatively reliable prediction of price action.
Analysts use many indicators according to two complementary approaches: graphical technical analysis and statistical or mathematical technical analysis.
In technical analysis, security prices tend to move in observable trends with prices moving in the trend.
The trend is considered intact until the trend line is broken.
Once a trend has been established, future price action is more likely to go in the same direction as the trend rather than in the opposite direction.
The old adage “the trend is your friend” means that you should trade in the same direction as the trend.
Technical Analysis: The Principles of This Discipline
The fundamental principle of technical analysis is that the price reflects all relevant stock market information.
A technical analyst bases himself on the history of an index (CAC40, DAX, Dow Jones, etc.) or a stock market security, disregarding economic or fundamental factors, because he assumes that the price has tendency to repeat itself due to the collective behavior of traders.
Therefore, technical analysis focuses on the following principles: – History tends to repeat itself – Prices move in trends – All information is already reflected by prices
History Repeats Itself in The Stock Market
Technical analysis is the study of what happened to a stock in the past with the hope that history tends to repeat itself.
Many of the chart patterns in technical analysis have been in use for many years, and are believed to still be relevant because they illustrate repeating patterns of price action.
This repetitive nature of price movements is attributed to market psychology.
Prices Move in Trends
Technical analysts believe that prices have a directional trend, i.e. up, down, diagonally, or horizontally.
The basic definition of a price trend was originally offered by the Dow Theory
All information is already reflected by the prices
Technical analysts believe it is important to understand what traders think as prices are known and perceived by all stock market participants.
Technical Analysis a Methodology Based On the Observation of Price History
Based on the observation of how prices evolve, technical analysis and graphical analysis are born from a trivial observation: Imbalances between supply and demand are phenomena that are part of the duration for form trends that remain in place until they reverse. In other words, despite powerful market theories, prices do not fully respond to random or efficient behavior that depends at all times on the totality of the market. available information, and it is up to the analyst to try to take advantage of it by detecting the prevailing trend, and the levels at which a reversal or break is likely to occur.
Technical Analysis, A Tool Used by Traders
Technical analysis is one of the most popular methods used by traders to speculate in stock markets.
In order to facilitate their decision-making process, many day traders and scalpers use strategies whose foundation is based on technical analysis.
Technical analysis consists of the study of stock market price charts and various indicators deduced from past stock market prices in order to predict market trends.
It therefore uses the past to obtain buy and sell signals.
Technical indicators used in technical analysis are mathematical formulas or calculations based on the study of prices and sometimes volumes, the purpose of which is to help the trader make better decisions.
Indeed, a technical indicator makes it possible to identify entry and exit points, to obtain buy and sell signals on the stock markets or to visualize graphically the evolution of the speed and quality of movement over a given period.
In short, in technical analysis, stock market indicators make it possible to predict the future evolution of prices on the stock markets.
If you master the advantages and limits of this methodology, it will allow you to become a better trader or investor.
Technical Analysis: A Study of Supply and Demand
With all the bells and whistles removed, technical analysis is essentially a study of supply and demand.
If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will help you become a better trader or investor.
Read More: Online Technical Analysis Course.
