- 1 Steps You Should Make to Conduct a Technical Analysis
- 1.1 Step 1. Understand the idea of technical analysis
- 1.2 Step 2. Learn 3 golden rules of technical analysis when working on the report
- 1.3 Step 3. Learn the differences between the methods of technical analysis
- 1.4 Classic (graphical method of technical analysis)
- 1.5 Algorithmic (mathematical) methods of technical analysis
- 1.6 Step 4. Take into account the volumes
Need to prepare a technical analysis report but you have no idea what it is? Technical analysis writing has never been easy due to its specifics. In recent years, technical analysis has gained popularity not only because of its relative simplicity but also due to its universal approach.
This means that it can be applied to all market segments and to different time intervals. In addition, technical analysis is a market analysis method that does not require a deep knowledge of finance.
Steps You Should Make to Conduct a Technical Analysis
It’s as easy as ABC to write a technical analysis report. Do you need extra help? If yes, you can always get professional help with papers at https://www.advancedwriters.com where experts will conduct research and analysis to create a detailed and well-structured report. Before writing a technical analysis report, you need to do a lot of work. There are several steps that will help you to organize the whole process and get the necessary results.
Step 1. Understand the idea of technical analysis
Technical analysis is a method for predicting the future behavior of securities using past data. Such data can cover a wide range of variables (from prices to volumes) generated in a specific area of the market. Technical analysis may be applicable for price analysis of a number of exchange-traded assets.
Step 2. Learn 3 golden rules of technical analysis when working on the report
Technical analysis rules:
- The market takes everything into account. Technical analysts do not focus on macroeconomic and political events, because they believe that any events occurring around the world will automatically be taken into account in the price. Of course, such spontaneous events as a natural disaster or geopolitical tensions can affect a certain market, but for technical analysts, the underlying causes themselves are not as interesting as such. The only thing that matters is how they are displayed in the chart.
- Prices are trending. The main postulate of the technical analysis states that in the absence of a significant stimulus, the price with a high degree of probability of creatures will move along the trend. In other words, technical analysts believe that prices always follow trends.
- Markets are cyclical. One of the most popular methods of technical analysis is based on the idea that history always repeats itself. Simply put, the market is cyclical, and therefore, having made a competent analysis of past price fluctuations, a technical analyst can predict future market movements.
Step 3. Learn the differences between the methods of technical analysis
Conventionally, the methods of technical analysis can be divided into the following:
- Graphic (classic) analysis. To determine price fluctuations, a standard live price chart is used.
- Indicator (mathematical, algorithmic) analysis. Price changes are predicted using numerous technical indicators that operate on the basis of various mathematical functions.
- Volume analysis. The movement of prices in the market is determined on the basis of the study of transaction volumes tied to a specific period.
- Candlestick pattern. The prediction of price fluctuations is based on the movement of candlesticks on the chart.
Classic (graphical method of technical analysis)
This analysis method is based solely on presenting the price of assets that add up to patterns. In the classic version, the use of indicators is not provided, however, most traders still resort to them to hedge themselves and more accurately predict the moment of a trend reversal. Graphical analysis is based on one of the tenets of technical analysis, which states that history repeats itself. Of course, price patterns never repeat each other exactly, but the fact that each model has certain formation rules is beyond any doubt. And this makes it possible to use them to receive a trading signal. The advantages of classical analysis include:
- Simple and clear conditions for the formation of models;
- Equally high efficiency at different time intervals;
- Independence from conflicting indications of indicators.
Algorithmic (mathematical) methods of technical analysis
This is the name of the methods of technical analysis, involving the use of various technical indicators. What are they? These are certain algorithms developed by traders based on certain mathematical formulas. Most often, the starting point in them is the average indicator of the market price of an asset for a single period of time. Advantages of using technical indicators:
- Trade dynamics (indicators are a much faster way than patterns and fundamental analysis);
- Indicators provide a lot of useful information (the main thing for a trader is to interpret it correctly);
- Indicators provide an early signal;
- A more accurate definition of entry and exit points.
This method of analysis is very popular with modern traders. It allows you to immediately clearly see the various probabilities of market movement, instead of having to independently calculate them using patterns.
Step 4. Take into account the volumes
In technical analysis, volume refers to the number of market assets that are traded on a stock exchange for a certain period of time. Volumes are very important because, according to market analysts, changes in volume always precede changes in prices. As history shows, periods of rising prices for an exchange asset are often preceded by an increase in its volume. If we talk about the relevance of signals, then trading signals in periods of the large volume are more reliable than in periods of insignificant volume. Simply put, volume measures the intensity of a price trend. The higher the volume, the less likely the trend will change.
After you consider all the data, draw charts, and get a clear understanding of the market fluctuations, you’ll be able to organize the information and prepare a technical report without any mistakes. If you still find it difficult, entrust this task to a professional academic writing service that will help to put all your thoughts in order and create a high-quality research paper.