Technical
Analysis
It adopts an objective to foretell the future trend of variance of pricing in the market.
It applies the charts as the main approach to carrying out a study on market behavior.
It is a perfect combination between different research approaches and professional domains.
Fundamental
Anaylsis
It mainly study on what might cause the demand and supply relationship of pricing uprising and downfall,
and the Technical Analysis mostly focuses on market behavior.
Two analytical methods try to solve the same problem-
Foretell the possible direction of operation for future pricing.
Fundamental Analysis is the factor of market sports; thus, Technical Analysis is the research findings.
(1) The following issues can be solved by using Technical Analysis
Measure up the degree of relative strength and weakness of both parties of buyer and seller.
Predict how the pricing may change.
Determine when and where to trade.
Effectively control the risks.
(2) Technical Analysis Theoretical Basis
Market behavior is any factor that may tolerate and digest all influential pricing: the fundamentals, political factors, psychological factors, and other factors. These factors all need to reflect in pricing through trading; that is, the variance of pricing will reflect the relationship between demand and supply. And the demand and supply relationship will determine the variance of pricing.
As to the present trend, Pricing has evolved by they way of trend. It usually adopts the existing trend and keeps on evolving. For example: Newton's law of inertia (The object is no longer affected by outer force, and keeps on motionless or moving in linear motion with an average speed.)
History will repeat itself Technical Analysis and market behaviorism share a certain relationship with human psychology. The shape of pricing shows us people whose mentality toward the market space is positive or negative. For example, the four seasons in Mother Earth, Chinese ancient karma…
(3) Effective Technical Analysis Methodology
Moving average line.
Golden section.
Golden section.
Wave Theory.
Technical Anaylsis analyze the trend and predict the future in the respect of Volume, pricing, time consumed that reaches these pricing and Volume, pricing fluctuations in space. The currently common approaches are K-line theory, wave theory, morphological theory, Tread Line theory and technical index anaylsis. We will discuss it later to break it down and analyze.
First step to Technical Analysis:
Learn to read the charts.
First step to Technical Analysis: First of all, you need to learn to read the charts. There are a variety of charts, but all of them are almost the same. The most fundamental and most commonly used are the Yin and Yang Candlestick Chart.
As the following chart, there is one post that tells a time line. If you pick 5 minutes, it means each post have 5 minutes for trading. If you pick 1 day, it means each post have 24 hours to trade.
The Yin post tells a downfall, which means the market price is lower than the opening market price. The Yang post means an uprising, which means the closing market price is higher than the opening market price. The following two lines indicate what the time for opening price and closing price are. The upper part and lower part of linear lines of the entity respectively represent the High and Low of each time line.
We mostly can analyze the Picture through morphological anaylsis of the candlestick chart to see what the time for reverse is. In our last Picture of an uprising, we can tell what the earliest time to turn down is. Then we can know how to make the best out of short position in the first time. Meanwhile, we can know when the earliest time to rebound from the steady is. Then we can take the lead in the first time.
There is still a part of Candlestick chart concerning morphology to study on Picture and see how it continues under which situation. If we hold on to this morphology, we can have a better Trading Strategy to keep the valuable orders and be full of confidence. We can even add opening position to make more profits.
Second step to
Technical Analysis:
Second step to Technical Analysis: The Second step to Technical Analysis to watch the trend is to learn how to draw a Tread Line, resistance, and support levels. Support level mans a pricing existing in larger support. The Exchange rate will rise up to its pricing nearby location and causes a round. The resistance level indicates a pricing with larger pressure at present. The Exchange rate will rise up to its nearby location and easily be restricted and drop down. To calculate support and resistance levels are the approaches to drawing a Tread Line. You may also combine with Technical indicator to help you, such as golden-bit, the average system, Bollinger Band, and etc.
Draw a Tread Line.
You will obtain an uprising Tread Line by connecting two rising lower points to draw a linear line in the trend of uprising.
You will obtain a downfall Tread Line by connecting two falling higher points to draw a linear line in the trend of downfall.
To draw a Tread Line in the future analytical market trend, you can have a higher accuracy. We need to use various approaches to draw a testing Tread Line for selection to leave out the useless and keep the correct and effective Tread Line.
To obtain a real effective Tread Line, you shall carry out pervasive verification so as to make up an ultimate confirmation. Those disqualified shall be deleted.
First of all, there must be a true trend existed. That is to say, in the uprising trend, we must confirm two successive uprising lower points. In the downfall trend, we must make sure that there are two successive downfall higher points so as to confirm the existence of the trend. We can only create a Tread Line by connecting two points into a linear line.
Next, after drawing the linear line, we shall obtain a third point to verity so as to confirm that is Tread Line is effective. Generally speaking, more lines we drew is touched, more easily the effectiveness is to be made approved. It is best used for making correct and effective prediction.
Besides, we have to incessantly correct the previous Tread Line. For example, when the Exchange rate falls down and breaks up the uprising Tread Line, and then quickly rises up to the upper part of this Tread Line. The analyzer is supposed to be the one to draw the first lower point and the latest formed lower point by reconnecting than to become a new linear line. Or the analyzer shall correct the second lower point and new lower point to make a more effective Tread Line.
Third step to
Technical Analysis:
Third step to Technical Analysis: Combine Technical indicators to confirm the judgment of the market trends.