The study of technical analysis involves the examination past price movements to find patterns and to determine the likelihood of future developments in the market , through the use of technical research indicators, studies, and other tools for analysis.
The analysis of technical aspects boils down two points:
Prices usually move in a zigzag pattern which is why price action is limited to two states:
Prices - when they vary
Trend Prices either zigzag up (up trend or bull trend) or they zigzag lower (down trend or bear trend)
Why is it important to analyze technical aspects?
An analysis of the technical aspects of a market will help you decide not just when and where to start a market but also what time and location to exit.
What can you do with the analysis of technical aspects?
The basis of technical analysis is the notion that markets are in a state of chaos (no one is certain what is going to happen next) however, in the same way price movements are not totally random. That is, mathematical Chaos Theory proves that within an environment of chaos, there are patterns that are likely to repeat.
This kind of chaotic pattern is evident in nature , in forms of forecasts for weather. For instance, the majority of traders are aware that there's no certainty in predicting the exact direction of price fluctuations. Therefore, profitable trading isn't about getting right, it's about assessing the probability of trading and making positions when the odds favor you. The process of determining probabilities includes forecasting the direction of market trends and when to place a bet and, equally crucially, the calculation of your risk-to-reward ratio.
Be aware that there isn't a magic combination of indicators that will reveal some kind of trading strategy that is secret. The secret to trading success is a good risk management discipline as well as the capacity to manage your emotions. Everyone is able to guess correctly and make a profit every time However, without risk management, it's practically impossible to stay profitable over the long haul.