What is the logic of technical analysis
Fundamental and technical analysis
Disadvantages of fundamental analysis:
- The main problem with fundamental analysis is that it gives no answer to the question of when exactly to get in and out of the market. Fundamental factors can simply signal that you should buy a currency pair or a stock without a clear trend emerging.
- It is extremely difficult for newcomers without specialist training to use this type of analysis first. It requires knowledge of economics and politics, as well as the ability to study company reports correctly, etc.
- If you have taken a long-term position in the market, you still need to keep an eye on the market as it is possible that new fundamental factors will emerge that have not been considered before.
Technical analysis examines previous price changes in charts. The same models and patterns are repeated at different intervals. Technical analysts believe the majority of strong moves are based on just two factors: fear and greed. And out of this human irrationality, there are ongoing opportunities for professionals to make money.
Over the past 50 years hundreds of different patterns have been collected, hundreds of indicators have been written, dozens of price indications have been found, each of which can be examined independently and then applied in trading.
The best-known example is the “turtle” strategy, in which a group of newbies acted according to a strictly prescribed logic. This was based on trading at the high / low in the last 20 days of price history.
Daily traders marked the level on the chart corresponding to the 20-day high and low for several futures, placed orders at this level to enter the transaction ... and were actually free until the end of the day if the orders were not triggered . Traders were not interested in the economy, retail sales growth / decline, etc. They only spent 15 minutes a day placing the orders in the appropriate places and that was all.
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