Technical analysis

Technical analysis is a tool or strategy for forecasting the likely future price movement of an asset using market data. The assumption behind technical analysis's validity is that the aggregate activities - buying and selling – of all market participants properly represent all relevant information about a traded asset, and so continuously assign the security a fair market value.

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Technical traders think that the most accurate indication of future price movement is the present or prior price activity in the market. Technical analysis is not a technique employed only by technical traders. Many fundamental traders employ fundamental research to evaluate whether to enter a market, but then utilize technical analysis to identify attractively low-risk buy entry price levels. 

The most often used form of displaying price movement on a chart is candlestick charting. A candlestick is produced by the price activity over a certain period, regardless of the time frame. Each candlestick on an hourly chart represents one hour of price activity, but each candlestick on a 4-hour chart represents four hours of price action.

Candlestick patterns are among the most extensively used technical indicators for detecting market reversals or trend changes. 

Along with analyzing candlestick patterns, technical traders have access to an almost infinite number of technical indicators to aid them in making trading choices. Moving averages are very certainly the most often utilized technical indicator. Numerous trading methods include the use of one or more moving averages. A basic moving average trading strategy would be. Buy as long as the price is above the 50-period exponential moving average (EMA); Sell as long as the price is below the 50 EMA.

Numerous traders employ daily pivot point indicators, which often indicate various support and resistance levels in addition to the pivot point, to determine price levels for entering or exiting trades. Pivot point levels often signal important support or resistance levels, as well as the boundaries of a trading range. If trading soars (or plummets) through the daily pivot and all accompanying support and resistance levels, this is considered by many traders as “breakout” trading, which will significantly move market prices in the breakout direction. 

Moving averages and the majority of other technical indicators are mainly concerned with identifying the anticipated direction of the market, either upward or downward. However, there is another class of technical indicators whose primary objective is to identify market strength rather than market direction. Among these indicators is the Stochastic Oscillator, the Relative Strength Index (RSI), the Moving Average Convergence-Divergence (MACD), and the Average Directional Movement Index (ADX).