Technical analysis is the research of the market dynamics by the use of graphics in order to predict the future direction of the prices movement.
1. Index (rate or price) takes everything into account. Any factor that influence on a price (economic, political or psychological) has already been taken into account by the market and has been included to the price. That’s why you need to study the graphic of the price to make predictions.
2. The movement of the prices submits to the trends (directions of the prices’ movements). So, making graphics of prices’ dynamic you set a goal to identify these trends on the early phases of their development in order to trade following its direction There are three types of trends on the market.
The basic trend has three phases. The first phase or the phase of accumulation, becomes when the most informed and farseeing investors start buying, as all inauspicious economic information has already been considerate by the market.
The seconds phase becomes when those who use technical methods of following trends come to the game. Economic information becomes more optimistic.
The trend comes to its third or final phase when the general public comes to the game and the buying craze starts on the market that is stirring up with the communications. The economic forecasts are full of optimism. The speculation volume is increasing. At this moment the informed investors, who were “saving” at the end of the previous trend, when no one wanted to “save”, start “spreading”. The trend comes to its end.
If the market gives an important signal, indexes confirm each other. Any important signal about the growing or falling of rates on the market, passes in the meanings of both indexes.
The trade volume must confirm the trend character. The volume must rise to the direction of the basic trend. The trends “lives” till it has evident signals that the trend has been changed.
The basic types of graphics.
1. Line graphics. On a line graphic the closing price for every next period is only marked. They are recommended for short periods (for some minutes)
2. Segment graphics (bars). On a bar the maximum price is marked (the top point of the column), minimal price (The lower point of the column), the price of opening (a dash on the left side of the column) and the price of closing (a dash on the right side of the column). It is recommended for time periods of 5 and more minutes.
3. Crisscross. There is no axes of time. A new column of prices is being built after the other direction of dynamic appears. You draw a cross if the prices have become lower for certain amount of units, and you draw zero if the prices have risen for certain amount of units.
4. Arithmetical and logarithmic scales. It is comfortable to use logarithmic scale if you analyze long lasting trends.
5. Volume graphics.
There are two options you can earn on currency exchange market.
OR you can hire experienced traders to manage the money on your trading account and they will trade for you. Read more about forex investment.