For new traders, the vast range of methods used to trade the financial markets may appear quite daunting. However, the reality is that the majority of these methods can be categorised as either fundamental analysis or technical analysis. While some traders use both, most traders these days focus mainly on technical analysis for some very important reasons, which you will discover in this article.

You will also learn how to perform technical analysis yourself, the best software for doing so and much more! The focus of this article will be on Forex technical analysis, however, we will also look at other financial markets, helping you on your way to becoming a master of technical analysis!

What is Technical Analysis?

Technical analysis is the study of patterns in price of a particular asset, with the intention of identifying trends and making predictions about future price movements. There are many ways to identify patterns in the financial markets, but most technical analysts focus on the following:

• Technical Analysis Chart Patterns
• In this study, technical analysts use drawing tools, such as horizontal lines, trend lines and Fibonacci levels, to identify well known chart patterns, such as symmetrical triangle formations and consolidation patterns. These patterns, once identified, give clarity to the strength and weakness of both buyers and sellers in the respective market.
• Technical Analysis Candle Patterns
• In this study, traders use price charts, such as candle charts, which display the open, close, high and low price levels of a particular timeframe. They use these charts to attempt to identify clues on the behaviour of buyers and sellers in a short period of time.
• Technical Analysis Indicators
• This is where traders use technical indicators to help in understanding the market condition. For example, many indicator provide signals on when the market is overbought or oversold. Other indicators can provide traders with clues on either rising or falling momentum.

There are indeed many ways to perform technical analysis of a security. In all cases, the technical analyst draws upon historical price data to identify recognisable and repeatable patterns. These patterns are then analysed to help traders identify the correct condition of the market, as well as possible points to enter and exit the market.