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Technical analysis: objectives and tools

Technical analysis is a methodology for analyzing financial markets that is based on the observation of prices and trading volumes in order to identify trends and possible future developments. The objective of technical analysis is to identify the points of entry and exit from the market, in order to maximize profits and minimize losses. In this article, we will analyze the objectives of technical analysis and the main tools used to analyze financial markets.

In addition, we will delve into related keywords, such as fundamental analysis, intermarket analysis, and books on technical analysis.

Objectives of technical analysis

The main objective of technical analysis is to identify price trends in the financial markets in order to predict possible future developments. Technical analysis is based on the idea that prices move cyclically and that these cycles can be identified and exploited to obtain profits. In addition, technical analysis focuses on identifying market entry and exit points. In this way, investors can maximize profits and minimize losses.

Technical analysis tools

The main tools used in technical analysis are charts and technical indicators. The charts allow you to display the prices of the financial markets in a clear and intuitive way. Technical indicators, on the other hand, are mathematical tools that allow you to analyze financial market data in order to identify trends and possible future developments. Among the technical indicators most used in technical analysis are the moving averages, the Bollinger Bands, the Relative Strength Index (RSI) and the MACD (Moving Average Convergence Divergence).

Fundamental analysis and intermarket analysis

Technical analysis is not the only methodology for analyzing financial markets. There is also fundamental analysis, which is based on the analysis of economic, political and social data in order to predict possible future developments in the financial markets. In addition, there is also intermarket analysis, which is based on the analysis of relationships between different financial markets, such as the relationship between the stock market and the bond market.

Books on technical analysis

There are many books on technical analysis, which can be useful for deepening the methodology and acquiring new skills. Among the most famous books on the subject are ‘Technical Analysis of the Financial Markets’ by John J. Murphy and ‘Candlestick Charting Explained’ by Gregory L. Morris.

Tips

To maximize profits in technical analysis, it is important to be constantly updated on the financial markets and on price trends. In addition, it is important to use a good money management strategy in order to minimize losses and maximize profits. Finally, it is important not to be influenced by emotions and to maintain a rational and disciplined approach when analyzing financial markets.

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