Technical analysis is the study of historical price and volume data to ascertain future trading opportunities. It can be used in any financial market from stocks to forex to options trading.
Technical analysis can be used as a timing tool in combination with fundamental analysis like reviewing company earnings and economic data - or it can be used on a standalone basis to determine the price trend and potential trade entry and exit prices.
What is technical analysis?
The theory behind technical analysis is that all available information is already represented by the price.
The logic goes that as a trader, it is better to focus on the price than on the information, which is already out-of-date when you get it. The main tool used by a technical analyst is the chart.
A price chart can be used to:
1) Determine the trend of the market, which could be up, down or sideways AND
2) Recognise reoccurring patterns that convey some information about what could happen next
Technical analysis on FlowBank platforms
The charts included in the FlowBank trading platform contain all the most popular trading tools and technical indicators from drawing tools to draw support and resistance levels to oscillators like the RSI to find overbought and oversold levels.
Each technical indicator has its own qualities, such as whether it leads the price or lags the price. As well as whether it performs best in trending or sideways markets. It’s worth noting that technical analysis offers no ‘silver bullet’ to be a successful trader. The analysis techniques are meant to give traders an edge rather than provide perfect forecasts.
Like anything worthwhile doing, technical analysis takes practise. The best way to do this is using the FlowOne trading platform.
To learn more about technical analysis, check our more detailed video guides and blogs