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MadMarketScientist

Technical Analysis Definition

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This is a form of market analysis that does not use economic indicators but instead, utilizes technical indicators and repetitive price action as indices for future price determination.

 

Technical analysis depends heavily on chart analysis and the ability to recognize chart formations. When using these chart formations, technical analysts will be able to develop a trading system that incorporates highly probable trading setups to establish long and short positions based on a well-researched trading strategy.

 

The basis of technical analysis is that price patterns tend to repeat themselves, and by using technical indicators to detect these price patterns, a trader can use the information to make a bet on the price direction of the asset in question.

 

Technical analysis works very well in forex because the market is a 24-hour market, providing a continuous stream of data which traders can put together to analyze. It is more difficult in other markets because of the reduced market hours, which produce price gaps on the charts.

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