Stock traders who have some experience always use market analysis. This significantly increases the efficiency of their activities. They mainly use fundamental and technical analysis. Fundamental analysis is the identification and comparison of relevant indicators of the economy. Technical analysis is the study of price changes in the past to predict their changes in the future.
Most often, traders prefer technical analysis in their activities. This is not surprising, because it is much easier to carry out than fundamental. Sometimes expert knowledge is needed to track changes in the global economy. And in order to use technical analysis, you just need to find data on price changes for a particular period for the financial instrument of interest . This information is available in every trading terminal.
In turn, technical analysis is divided into graphical and mathematical. The first one is based on drawing up and analyzing price charts for a certain time period. There are several ways to display prices in graphical analysis. These are bars, candlesticks, kagi, lines, renko, tic-tac-toe.
The study of the movement of trends is of great importance. At the same time, both its life cycle and the direction of movement are revealed. Trends are short-term (live from one day to three months), medium-term (from three months to a year), long-term (more than a year). Tracking the trend correctly will help you close a good deal. It is believed that the most profitable for a trader is the middle of a trend’s life cycle.
At the beginning of a trend, the number of deals increases, and prices change from 1/4 to 1/3 of their total fluctuation. The middle of the cycle is characterized by a slight decline in activity. At this time, there are a large number of resellers on the market. At the end, quotes may drop to their first value. The number of transactions may decrease, but this is practically not reflected in the price level. They usually remain the same. The second life cycle is considered ideal for long-term transactions.
The main role in the mathematical method is assigned to indicators and oscillators. Indicators are used to detect market trends, as well as to identify the moments of their change. Using too many of them can lead to inaccurate results. Therefore, some groups of indicators are intended for analysis in the presence of a trend. Others are needed in the so-called flat. The function of oscillators is to signal market reversals.
It is usually recommended to use oscillators and indicators of different groups when analyzing. This is necessary in order to smooth out their possible negative influence. In total, there are three groups of indicators and oscillators:
- trending
- flat (in the absence of a trend in the market)
- volume indicators that analyze volume changes.
