BASICS
Cryptocurrencies Review – BTC vs. ETHJul 21
TECHNICAL ANALYSIS: A KEY TO SUCCESS
Technical analysis is a set of significant tools, which are used to define the Stop Loss and Take Profit levels for the position (when to open and close the position) taken by investors and traders in the financial markets. There are many advantages of using it in your trades and market forecasts.
First, fundamental analysis may provide a gauge of the statistics, supply and demand, etc.; however, psychology is not the case in such an analysis. And as it was the case in many fields and sectors, the markets are also influenced at times by emotions. Sometimes the emotions have stronger influence on the markets when compared to the facts, data releases and statistics.
The most important economist of the 20th century, John Manyard Keynes, once said: “There is nothing so disastrous as a rational investment policy in an irrational world.” And the technical analysis provides the only mechanism to measure irrationality emerges in the financial markets.
“Money” might be given as the most significant example in that case. It is just a paper and has no intrinsic value, but it can be exchanged for something tangible. You can do shopping, buy an apartment flat, a car, and many others. The reason is that we have a shared psychology. It is useful because everyone believes it has a value.
Second, discipline helps you to mitigate emotion and the technical analysis is an important component of disciplined trading. When you invest in something and/or open a position in a certain financial instrument in the market, emotionalism steps in and objectivity loses its priority. To understand this fact more clearly, you can try trading with a demo account and then, try trading in a real account after funding it yourself. There will be huge difference between your moves according to your level of rationality. However, technical analysis puts objectivity back and provide you a mechanism to set your levels for opening a position and determine your Stop Loss and Take Profit levels once you open your position. Your risk reward ratios and everything will be there thanks to this well-formed analysis.
Last but not least, the price action is the most direct and easily accessible method of seeing overall supply demand relationships. Sometimes, fundamentals are not known to the general public but you can expect it is already in the price thanks to the technicals. Those who have advance knowledge of some market moving event will most likely buy or sell until current prices reflect their information.
First, fundamental analysis may provide a gauge of the statistics, supply and demand, etc.; however, psychology is not the case in such an analysis. And as it was the case in many fields and sectors, the markets are also influenced at times by emotions. Sometimes the emotions have stronger influence on the markets when compared to the facts, data releases and statistics.
The most important economist of the 20th century, John Manyard Keynes, once said: “There is nothing so disastrous as a rational investment policy in an irrational world.” And the technical analysis provides the only mechanism to measure irrationality emerges in the financial markets.
“Money” might be given as the most significant example in that case. It is just a paper and has no intrinsic value, but it can be exchanged for something tangible. You can do shopping, buy an apartment flat, a car, and many others. The reason is that we have a shared psychology. It is useful because everyone believes it has a value.
Second, discipline helps you to mitigate emotion and the technical analysis is an important component of disciplined trading. When you invest in something and/or open a position in a certain financial instrument in the market, emotionalism steps in and objectivity loses its priority. To understand this fact more clearly, you can try trading with a demo account and then, try trading in a real account after funding it yourself. There will be huge difference between your moves according to your level of rationality. However, technical analysis puts objectivity back and provide you a mechanism to set your levels for opening a position and determine your Stop Loss and Take Profit levels once you open your position. Your risk reward ratios and everything will be there thanks to this well-formed analysis.
Last but not least, the price action is the most direct and easily accessible method of seeing overall supply demand relationships. Sometimes, fundamentals are not known to the general public but you can expect it is already in the price thanks to the technicals. Those who have advance knowledge of some market moving event will most likely buy or sell until current prices reflect their information.
