Technical analysis is a framework method formed by major investors in their study of price fluctuations. It is assumed that investors can extrapolate current trading conditions and future price trends based on historical price fluctuations, because technical analysis assumes that the latest information on the market has been reflected in price fluctuations.
Often investors look at past charts to find trends and patterns to help you get some good trading opportunities. When all investors rely on technical analysis, the patterns and indicators of these price fluctuations will fulfill themselves. As more and more investors look for the same price levels and chart patterns, these volatility patterns will be easier to form on the market.
Technical analysis has many advantages. Usually, in technical charts on different financial instruments, you can find more specific buy/sell points, which are easy for each investor to learn. Moreover, in most cases, technical analysis reflects all news changes in the market. After all, investors alone cannot always monitor the important factors affecting the global stock and FOREX market every day. Therefore, changes in technical analysis may inform investors in advance of the future or latest major news so that investors may be prepared for position risk management.
There are a wide variety of technical analysis applications, including universal indicators of RSI, MACD, KD, and moving average, and candlestick charts, which can help investors to assess the market, and make buy and sell decisions and implement take-profit/stop-loss strategies.
Take the Relative Strength Index (RSI) as an example. It is similar to the random oscillator. With a scale from 0 to 100, it also indicates whether the market is overbought or oversold. Normally, an RSI of under 30 means an oversold market, and an RSI of over 70 indicates an overbought market. You may make a buy strategy when a particular asset is oversold, or go short when it is overbought.
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