What is Technical Analysis?
In simple words, Technical Analysis is the usage of charts and graphs to understand the trading and behavior in the market in a better way. In the past, people used to refer to books and previously collected data to make their decisions. Now due to the availability of the internet, traders can easily manage such analysis with real-time information availability and access to better platforms.
There are number of websites, applications, and software that help traders to perform technical analysis. The biggest advantage of that? They can determine the entry and exit points in the market and earn profit.
Technical analysis is different from fundamental analysis as it purely depends on the numbers. Whereas fundamental analysis is based on the research of the factors that are influencing the market pricing. Therefore, saying it is better than fundamental analysis might not be true. So, the choice of analysis method totally depends upon the trader.
There are several advantages of learning technical analysis for trading. In this article, we will be discussing those advantages in detail.
- Direction of the Market
Technical analysis helps traders and investors to understand the market direction. Markets are very random and no one can tell when to invest. Moreover, when it comes to cryptocurrencies, the market is more volatile than ever.
In such a situation, traders do not know without analysis where the actual market is heading. Knowing the direction of the market saves the trader from great loss.
Technical analysis gives data for months and even years, which helps the traders to make his decisions wisely. For example, if someone has invested money in the stock market 2 months ago, but for the last two months, the stock he bought is continuously dropping the price, now in this situation technical analysis would help him to make a decision whether to keep the stock for more time or sell it immediately.
2. Rules and Guidelines
Even though markets are random, there are always rules and guidelines to follow while trading. Learning this analysis helps to follow rules and guidelines that are necessary to do a trade.
Technical analysis also helps the trader to make his own rules. Professional traders usually create their own rules which assist them in the decision-making process of why, when, and where to enter or exit the market.
3. Quick Analysis
Technical analysis is quicker than fundamental or any other type of analysis. There are simple software to use on the internet for technical analysis. This software is super quick to analyze data.
Once you enter the data and run the system, the data is usually analyzed data within a few minutes and the software converts them into charts and graphs. In case you are not the one who prefers software, platforms such as Trading View can allow you to draw your own charts and graphs based on real-time market data and use that to make new decisions.
4. Inexpensive
The cost of doing technical analysis is very low and can be said as close to nothing. Usually, the software is free which helps to do the technical analysis or has a very low cost to buy. Technical analysis is inexpensive compared to fundamental analysis. Many companies provide free charting software for traders to do technical analysis for trading. Even though technical software is inexpensive, the data they provide is worth it. As a result, traders can take better trades and earn profits based on their investments.
5. Provides Great Information
It is useful for long term, short term, and swing trading as well. The technical graphs and charts provide detailed information for the traders to analyze the data. Chart patterns, momentum of markets, and trader’s psychology are types of information that are being used by traders. Technical gives deep information and ease in the decision-making process.
Summing Up
If you want to become a trader, learning technical analysis might be the right start for you. Since it helps with determining when to buy and sell, the chances of loss can be decreased significantly. On a side note, having a stable and strong internet connection is necessary to become a trader. That is because it is essential to keep an eye on the market data in real-time. However, if you are living in a rural area, options such as Hughesnet internet might your best bet. So, make the choice wisely & Happy trading.
