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Five things every trader should know about technical analysis

Traders use a better perspective on what is happening in the market. Many operators have misconceptions about who they are and what they can do for them. The technical analysis has aspects that can be better understood.

  • All market information is in its price action.

Fundamental analysts focus on these issues as well as sales figures to determine the appropriate value for a given stock. A technical analyst is interested in “why” a stock price, and more interested in the future. In essence, a technical analyst believes that all news and bad news is already reflected in the price information. Instead, they focus on the momentum that could be used when and where.

  • Trade volume can provide important information.

Many price movements, such as a new maximum, for example, is considered more important. For most technical analysts, the higher the volume of trading, the more the break is deemed to be valid because of a large quantity of conviction and enthusiasm on the part of the operators. This is the reason why the volume appears in almost all graphs of technical terms.

  • Markets are motivated by psychological factors in addition to core values.

The demand for a given value increases or decreases according to the collective evaluation made by all the merchants concerning the real or perceived value of this value. For example, an announcement regarding the shares of the company. As a result, the demand for shares in the company could increase. A technical analyst wants to identify this by recognising the improvement in price action and the increase in the volume of operations.

  • Prices tend to change according to trends and patterns.

Public perceptions can change quickly. Sometimes these changes affect the stock market in general or the financial markets at large. Other times, these changes only affect a particular segment of the market or a specific action. However, most of the time, without concomitant “news” can explain “why” this movement takes place. This often shows that price movements are random. However, experience has been observed in both models and trends. A “trend” can be defined as the general direction of the price of a particular market during a given period.