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| Technical Analysis |
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Technical analysis is a method in estimating price change through observing data generated by the market. A typical market price data is an information type widely used in technicians’ analysis, though most of them pay close attention to turnover and open information of forward contracts. Any type of analyzing method, techniques and other methods are based on the same principle. It is a methodology with record of evidences of a long term. After finding a transactional system that works for you, more complex and abstruse fields are merged into your transactional tool box. Almost every bargainer uses some tables of technical analysis, even those who value basic market principles refer to price diagrams before making a transaction. At their fundamental level, these diagrams help bargainers in deciding ideal entering point and exiting point. These diagrams present historical prices under study. In this way, bargainers look at a diagram to know if they buy at fair prices (based on a specific historical stage), sell at the peak of a cycle or if they possibly invest in next stage of fluctuation. All these are market chance provided by diagrams. Though the deciding element is bargainers' intensive intelligence, diagrams help them in further knowing and studying the market. On the surface, when technicians are covered by diagrams and data tales, they ignore market foundations. This may happen. However, a technical dealer will tell you all foundations have been shown in prices. They not only worry about the terrible recent inflation caused by so many natural disasters or by data and how a price operation enter a mode or a trend, but also worry about how that mode can be used in estimating future prices. Assumption of Technical Analysis √ All market foundations are described in actual market data. Exchange rates reflect all things, which means that changes in all elements like economy, politics and psychological expectation influential to exchange rates are reflected truly and adequately in exchange rates. √ History replays itself and therefore the market is quite predictable. At least these modes out of metric modes are generated in price fluctuation and are called signals. The target of technical analysis is to discover and verify market flowing signals. √ Prices moves in trend. Exchange rates change according to certain trend and disciplines. The module of any technical analysis system includes price diagrams, volume diagrams and a plenty of other data of market modes and activities, such as most frequently-studied data, various types of market data operation, strength and sustaining force deciding special market behavior. Therefore, it is not simply to forecast future market value depending on price charts, while technicians use many other technical tools before entering a transaction. Other aspects in trading should be strengthened in technical analysis. It happens frequently that when the price comes, a trader miss it. It is rather difficult to decide entering point or exiting point based on his or her technical study because the basic fact is various outer elements firstly cause rapid price movement.
Price Diagrams Graphical Chart In graphical chart, all prices are connected in sequence to form a seriate curve. Time and price are used as coordinates in most graphical charts. As is shown in the picture, the abscissa indicates time and the ordinates indicates price; they are combined to show exchange rate between USD and JPY. The advantage of graphical chart is visible. The Individual foreign exchange dealers may obtain some market perception. Why the influence of turnover is not considered in foreign exchange analysis? International foreign exchange market is an open and intangible market. Advanced communicative tools integrate worldwide foreign exchange markets. Market participants make transaction around the world (futures exchange excluded) and foreign exchange turnover of a period cannot be calculated exactly. Therefore, in technical analysis of foreign exchange market the influence of turnover is basically not considered, that is without considering price and turnover as a whole. This is a distinct difference between technical analysis of foreign exchange and stock price analysis. Histogram: longer length refers to bigger exchange rate fluctuation? Histograms are often used to manifest market change in a period (such as one hour, one day or one week, etc.). The column top refers to the highest price of the period, the column bottom the lowest price, and there is a short line on the left and right side of the column representing opening prices and closing price. The longer the column is, the bigger fluctuation of exchange rate is. If the closing price is higher than the opening price, it means that buying atmosphere is more dominant; if the closing price is lower than the opening price, it means that selling atmosphere is more dominant. 
Technical Indexes Below there are several most pervading indexes used in technical analysis. Tendency Index A definition used to describe the continuous price movement in a direction in a period. The tendency is shown in three directions, which are upward, downward and sidewise. The tendency index levels various prices to generate general market trend (for example moving averaged tendency line). Strength Index Market strength describes the strength of market opinion, which is a price generated through testing the market positions received by various market participants in cross reference method. The signals of the index component are in accordance or lead the market (for example, turnover). Repeatability Index It is used to describe the scale and size of the fluctuation of daily prices and their directions. Usually, the change in repeatability tendency leads to price change (for example, the Bollinger Group). Cycle Index It is used to manifest repeated models of market change, especially for repeated incidents like season election, etc. Many markets have a moving tendency of cycle model. The cycle index determines time measurement for a specific market model (for example, the Elliott Wave). Support/ Resistance Index It describes price standard. Market repeated rising or falling reverse here. This phenomenon is caused by supply and demand (for example, trendline). Dynamic Index Dynamic is a common definition used in describing the speed at which prices changes in a specific period. Dynamic index determines the trend strength. When it goes for a period, dynamic is at the highest point at the beginning of a trend, while it is at the weakest point at the turning-point of a trend, representing the ending of the movement in that direction. If the trend is powerful and the price is stable, it indicates potential changes in price direction (for example, the calculation line, the moving averaged line and the relative strength index). |