Technical analysis is the use of scientific tools to forecast price movement of a commodity. It is based on reading prices through charts. Technical analysis can be defined as a well articulated process of identifying trends at an early stage, getting into the trend and stay with it until you see heavy evidence against it.
I really don’t like the fact that the phrase ‘technical analysis’ is used to describe this process. This sounds a little mis-normal as what is actually done in technical analysis is to determine price based on the attitudes of those already in the market and that of those intending to get into the market.
If there is one thing to take home from technical analysis, it is the fact that you must not go against a trend until it reverses. A trend reverses when there is a weight of evidences pointing to it. This includes; trendlines, moving averages, momentums, candle sticks, etc.
In all that you do, always remember that technical analysis doesn’t have to be perfect. In fact, it is far from being perfect even when you correctly interpret a situation. That is to say that you don’t put all your trust in technical analysis but, will have to complement it with fundamental analysis wrapped in common sense analysis. Hey! I don’t attack me with this as there is nothing like common sense.
If you really want to succeed in trading commodities, you must firstly learn to keep things simple. Do not let anyone confuse you with some complex and sophisticated analysis. It doesn’t matter what kind of trader you are; short-term trader, long term trader, day trader or simply a scalper, technical analysis still remains the same. Again, it does not matter what commodity you are dealing on; gold, silver, shares, currencies (forex), etc.
This happens to be the first post of this blog, I encourage you to stick to this blog, devour all the contents that will be coming on a fairly regular basis.
Technical analysis is not a rocket science. Again, all it takes it keeping things really simple.
To your success as a trader!