Forex Technical Analysis :


Technical analysis or graphical analysis

Technical analysis, which could be described as graphical analysis, is none other than an empirical approach to determining the course of the course. It was introduced by Charles Dow during the 19th century, so the technical analysis is based on Dow's Theory.

Initially, forex technical analysis goes back to times well before the 19th. Indeed, chandelier graphics were already used by the Japanese to anticipate rice prices around the 17th century.

In the forex technical analysis, we must distinguish two major currents of thought. We shall speak here of Chartist analysis and modern analysis.

What is the difference between chartist analysis and modern analysis?
Before discussing the technical subjects, let us first of all stress that these methods are in no way contradictory, besides many traders appreciate mixing genres to make the best.

Chartist analysis

The chartist analysis consists of identifying configurations directly on the courses, for example the configurations of Japanese candlesticks or the use of straight lines of trends. What should be remembered is that in chartist analysis one only looks at the courses on its graph.

Modern analysis

The second "modern" approach was introduced in the 1970s and 1980s with the beginnings of informatics. It considers that the interpretation of "raw" graphs goes beyond human understanding. Use mathematical indicators to facilitate the interpretation of courses. These indicators are very often of statistical origin and allow the modeling of concepts not obvious to the eye that are: the fundamental trend, volatility, overbought, ...

An important feature of technical analysis is that it is an empirical approach that is uncertain, all analysts make mistakes, what counts is to succeed in predicting a little better than chance. In technical analysis, it is not difficult to make a graph say a thing and its opposite, the important thing is to "capture" the intentions of the market.

The importance of experience in technical analysis
Graphical analysis is a matter of experience rather than knowledge, the acquisition of knowledge in this field is much easier than in fundamental analysis. However, reading a chart requires a certain habit and hindsight to detect the real underlying trend that governs the market.

Another important point to keep in mind: there are no good or bad analyzes. You will be able to make losses while everything seems to go in your direction. The hardest thing for a novice is that he can accept to be mistaken. It is also necessary to know how to dissociate the analysis from trading, these are two very different things, the analysis consists in forecasting an evolution and the trading consists in realizing gains.

Analysis is not enough, capital management is also paramount
Yet, if we often pass his analyzes, we should often win and so we would be good in trading, right?

Not necessarily, without going into the vast field of money management, winning often is not synonymous with gaining much. For example if you realize successively gains and you suffer a loss greater than these 9 gains then you are losers, nevertheless you managed to anticipate 9 times out of 10 the movement of the courses. Conclusion: You are a good analyst but a bad trader. Trading has many aspects and contrary to beliefs the best traders are not the ones who have the best success rate but rather those who manage their positions as well as their cool.

To return a little to the subject, I offer you for a demonstration the view of a graph used in technical analysis.

Here is the type of graph that a person performing the technical analysis must be able to decrypt, usually this type of image has the gift of scaring the beginners who imagines at this time that the technical analysis is Reserved for experts. As I said earlier, technical analysis is easy to learn.