Technical Analysis

Technical Analysis

Technical analysis is a study of the movement of prices through graphs that show the previous movement of prices. It helps us to understand the past movement and predict the next movement over different periods.

The technical analysis is used to determine the direction and places of rebound as well as the appropriate entry and exit points according to the strategy used in the analysis. It also introduces the traders to the short and long directions of the financial asset.

Trading platforms or trader web platforms are available on many technical indices to assist in the technical analysis. It is also available on the means of drawing such as:  lines are used to determine the direction of the trend, resistances, subsidies as well as angles and Fibonacci levels.

The most important used indices

There are a lot of technical indices that can be used in the analysis. However, using so many indices does not neccessarily enhance your expectation of the next movement. Therefore, indices must be tested to determine the pros and cons in order to know which indices can contribute to the success of your strategy.

1- Moving average

There are types of moving average and the difference between them is in the time period in which the index counts the average price.

2- Relative Strength Index

It is an index based on measuring price momentum in the recent period. Below the chart, we find  0%, 50% and 100% , which indicate the momentum type. If it is below the middle (50), this indicates the negative momentum and vice versa, i.e if it above the middle, it indicates a positive momentum.

3- Stochastic oscillator

It is an index used to measure the degree of overselling or overbuying of assets. The ratios of 20% and 80% are the most important ratios in the index. If the index reaches 20% or less, it means that the price is oversold and may rise during the coming period. If the index reaches 80% or more, this means that the price is overbought and may fall during the coming period.

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