Technical analysis is the use of mathematical methods, necessary for the formation of indicators that will act as filters for determining the particular properties of the market.
In fact, they are the mathematical tricks in financial markets.
The main tool of technical analysis is a technical indicator.
A technical indicator is a graphical representation of the mathematical transformation of price flow.
There is a large number of indicators and as in the case of meat, fish or fruit preferences, there is no right or wrong one. Everything depends on the fact whether you can build the right trading strategy on these very factors.
All technical indicators are divided into four basic groups:
- Trends. These are the indicators determining the probable price direction. The most popular are moving averages, SMA, EMA, VMA
- Oscillators. These are the indicators determining the probable turning point of the price chart. Unlike the trend indicators, which operate only in the case of directed movement in the market, i.e. with the trend, the oscillators are equally good with both the trend and flat. The most popular oscillators are RSI, MACD, and Stochastics.
- Volatility indicators. These are the indicators that assess the probable potential of price movement. This volatility in the Forex currency market means the degree of price variation. It is not difficult to understand this term; the price forms the highs and lows over a certain period of time. The distance between the highest and lowest prices will be an indicator of volatility.
- Special indicators. They include non-cost and non-market indicators. But we will discuss them during the other courses. Now you just need to know that they exist.
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