Technical Analysis is an approach to forecasting prices by studying past market data, primarily price and volume. Technical analysts believe that all relevant information is already reflected in a stock’s price.
Technical analysis takes many forms, but all are based on recent market activity. Trendlines show support and resistance levels. Chart patterns indicate where buyers or sellers may be stepping in to pick up lower-priced shares.
Moving averages are used to identify uptrends or downtrends, and trading volumes reveal supply and demand shifts. These are just examples of technical analysis tools (read more here). Because it does not require any calculations for complex financial analyses, technical Analysis is considered more accessible than fundamental Analysis; this has helped fuel its popularity with individual traders.
Technical analysis provides a foundation for informed decision-making by identifying market trends and price patterns. However, these trends and patterns must first be identified and understood to be effective.
Keep in mind that many technical indicators are not 100% accurate or reliable on their own. The most powerful aspect of any indicator is its ability to confirm what we already know about the market based on sound reasoning and validated by other indicators.
It is essential to consider all available information before taking a trading position. Technical Analysis should only be part of a well-balanced stock trading plan that includes fundamental, statistical, and psychological aspects.
In addition to being easy to grasp, technical Analysis is also relatively easy to apply when analyzing historical data due to the availability of charting software. Today, most brokers offer free charting software and even sophisticated technical analysis programs installed on a desktop computer, laptop, or even a smartphone.
So why use technical Analysis in forex trading in Singapore?
It is legal: Like most things in life, there are always exceptions to the rules and regulations out there, so it’s best to read up on what they exactly mean when we say “legal”. But as far as it’s known, nobody is going to put you into jail for doing technical Analysis or making money from forex trading.
It doesn’t involve high-frequency trading:
High-Frequency Trading (HFT) can move markets around without anyone knowing why forex trading is decentralized and does not involve much HFT. It makes sense to hone your technical Analysis before moving into other financial markets where HFT plays a more significant role.
It requires less capital:
Compared to index funds or futures trading, it doesn’t require too much capital to start. Granted, you are going to lose money at first. Still, if you follow some simple rules like “cuts losses quickly” and “let profits run”, chances are good that you will make enough money even with minimal capital to grow into more significant projects.
It’s easy to get started:
Go to Google, and you will find plenty of free charting software for download, even technical analysis courses online if you are looking for something more structured. Setting your own rules is also well within reach since there are no genetic barriers when it comes to learning this stuff; compared to sports where only a tiny percentage of people can become good enough in their lifetime, technical trading analysis is open to everyone who has an interest, so you’ll likely be able to learn it.
If you ask anyone who has done technical Analysis for a long time why they do it, there is a good chance that they will tell you that it’s fun! I don’t think I’ve ever heard my friends from school or those who work as analysts in large firms say the same thing about their jobs.
Technical Analysis is an essential tool used by all successful traders and investors to decide when to buy and sell. In Singapore, where there is a significant number of forex traders, hiring someone with experience in technical analysis may be helpful, especially when dealing with more significant accounts. Often, market noise can cause incorrect trading signals, leading to a loss of a lot of money in a short period.