What are the basics of technical analysis in trading ?
In trading, the method of studying historical prices is called technical analysis. Its particularity is that it allows you to discover buying and selling signals within a given time frame. This analysis is based on probabilities and possible scenarios that could occur. How is technical analysis done? This article aims to explain the tools of technical analysis.
Mastering Chartist patterns and Japanese candlesticks
There are two methods of analyzing the stock market: fundamental and technical analysis. The latter is one of the simpler basics to use, as it requires less skill. Indeed, the first tools whose use is essential are the chartist figures and the Japanese candlesticks. Chartist patterns are all the shapes presented by the chart. These patterns can be in the form of a channel, triangle, bevel, etc. They are the basis of technical analysis. As for Japanese candlesticks, they are responsible for displaying the closing level, opening level and high/low point of the market over a given period. In addition, their study allows for the identification of scenarios in technical analysis.
Knowledge of technical indicators
Technical analysis consists of studying the evolution of an asset's price on the stock market. Apart from chartist figures and Japanese candlesticks, it also takes into account technical indicators. These indicators are based on mathematical formulas that are more or less complex. There are several types of indicators, each with its own specificities. So, to make a good technical analysis is imperative to use indicators to confirm the previously established scenarios. On the one hand, indicators allow you to identify whether the market is overbought or oversold and on the other hand, they provide clues about the bullish or bearish trend of the market. In fact, they can be used to reinforce a buy or sell signal when coupled with the study of graphs.