Forex and CFD traders have used a variety of tools to help them successfully predict the direction of the market. The best traders on eToro and other huge brokerage firms utilize the available tools and resources that they can access not just from the internet but also those that they can avail from their service providers. And among this is one method that has been continuously used by investors of all calibers is technical analysis.

The life cycle of an asset’s price movement is based on the premise that market conditions can shape the way it behaves. Technical analysis investigates perceptible trends that investor tendencies may imply, and looks into possible patterns in price movements that may indicate future activity. These factors are considered, and how the interplay of human investors and the market can be predicted with some regularity.

Technical analysis strategies involve interpreting charts to correctly deduce when assets are primed to increase in prices; or when it most likely they are to suffer a decline. Historical performance of different assets rely on the use of statistics to relate past prices and trading volume in predicting what is likely to happen. The goal of interpreting data from technical analysis is to accurately speculate market movements and consequently, receive high returns on these investments.

Table of Contents

Benefits of Technical Analysis

Technical analysis are greatly benefitted with the data presented by a market’s price history. Traders of commodities, currencies, indices, stocks and even cryptocurrencies can forego the need to be constantly on the watch for financial news. They can also do away with going over the balance sheets often. They just had to rely on factors that influence price behavior as depicted in a price chart. Generally, price charts are formatted with an easily-read trend line, using bars or candlesticks. It is a very useful tool which could potentially save traders from purchasing a contract at the wrong time.

How Can Market Trends Work For You?

Experienced traders are allowed more control over their trading as they can anticipate an asset’s future position just by following market trends. And professional traders can look into technical analysis to find reliable information as basis for sound financial decisions.

  1. Information that traders can get from technical analysis are the following:
  • Prevailing trends
  • Investor sentiments
  • Force of supply and demand within a market
  1. Check that the data you are using is valid for the type of asset you are using it for.
  2. Information is Key. To make technical analysis trading an effective tool, make sure that graphs and data are regularly updated showing the sustained movement of one asset. This historical data will play a big role in determining whether a trend is developing or not.
  3. Straightforward Interpretation. Take the most straightforward route in interpreting graphs: look at the high and low points of assets for the past few hours.
  4. Flexible Market. Remember that the market is flexible and there are external events that can influence market movements such as politics and natural occurrences. Being familiar with technical analysis should be a continuing education on your part, substantiated by frequent readings and research.