Technical analysis is the study of past price movements by using graphs as the main tool for analysis.
This analysis uses a comparison of current price movements and historical price movements to find trends that can predict future price movements.
Technical analysis helps traders identify trends and make purchases or sell based on signals or indicators.
Technical analysts believe that Historical price movements of financial instruments can be used to identify future price movements.
Types of Trader
So you can understand how to use graphs for analysis correctly You should know first what kind of trader you are by understanding the type of trader.
- Short term trader – A short term trader is a person who trades within one day by entering and exiting by opening and closing positions quickly.
- Medium to long term traders – Medium to long term traders are those who have opened investment positions for a long time (Many weeks/months)
There are 3 types of graphs as follows:
- Line graph
- Line graph showing the line from one closing price to another closing price of another day.
- Line graphs can be used to show price movements in various time periods.
- A line graph shows the overall price direction of an instrument over a period of time.
- Bar graphThe bar graph provides more insights showing both the opening and closing prices of each day. Including the highest and lowest prices of a given time period in the form of bars or lines.
- Candlestick chartThe candlestick chart shows the opening and closing prices. Including the highest and lowest price of the specified period The graph looks like a candle which can be interpreted and identified the price trend more easily.