Technical Trading Analysis – Finding the Patterns to Trading Success
The term ‘analysis’, when associated with trading, can conjure thoughts of complex equations. Perhaps musings on string theory and its place on the stock market. Even numerology and how a supernatural knowledge of the significance of numbers can bring the big bucks – all that’s needed is for one to sell one’s soul.
QuickTrade is here to tell you that none of that is true. To be a successful trader, you don’t need savant powers. You don’t need to be some kind of mystical polymath. All you need is a little coaching, some top tips, and then time to put that all into practice.
Here are a few tools to add to your CFD trading analysis utility belt, to help you get a better view of a market.
But before we dive in, a disclaimer – learning the minutiae that makes up technical trading analysis, is by no means the golden ticket or the silver bullet that’ll cause that windfall. Good CFD trading analysis can however, put you in good stead for an upper hand in your trades.
How do you do a CFD trading analysis?
Analysing the market is made up mainly of a number of assumptions – these can each be used as singular points of insight to an overarching window into market performance. Let’s detail some of the most pivotal of those assumptions.
Predicting a price movement
Prediction may be a little bit of a strong word here – it implies uniformity in the market, and that at certain times, certain returns are guaranteed to come around again. Low-hanging fruit for you pluck at some point or other. What we mean here, is predicting the market through the assumption that certain character traits it’s displayed before, are traditions to look out for that may mean the possible arrival of a return that’s happened before. But of course, it may not. It’s simply about familiarising yourself with market, knowing how to look for the patterns in the market, to possibly give yourself an advantage.
Downtrends – the micro symptom of the macro cause of the bear effect on the market. When stock prices falter over an extended period, it’s deemed a downtrend. Identification of the impending arrival of this trend, is a very useful analysis assumption to curb major loss.
Horizontal trends in the market represent unpredictable movement – simply because the patterns are erring toward simultaneously low and high pricing trends. The takeout on this kind of analysis? Uncertainty.
The volume of trades
One of the best tell-tale signs of a significant event in the market, can often be revealed in the volume of trends happening at a given time. If one is analysing for validity in particular stock trends, an increase in the volume of trades is a direct side-effect of an increase in stock price, and so the trend would be valid. Conversely, if there’s little to no volume, it could be because of a reverse trend.
Market movement legacy
This one isn’t about history repeating itself on the market, per se. It’s about how traders are reacting to stock price movements at the time. The assumption here is that there may be a repeat. The operative word here is ‘may’, though, because the market, as we know, has no real repeatable pattern. But if watched closely and with some savvy, a possible repeat that’s incoming can still be identified. It’s simply an echo, if you will. But it could be a very lucrative echo if it’s spotted in time.
There’s, of course, no exact science here, unfortunately. Lending some time to getting to know these assumptions, though, can certainly help you build your gut feel. The fact of the matter is, that certain patterns do and will repeat. Learning how to spot the possibility of such an event, with a CFD trading analysis, could put you in a better position to grab the ‘bull’ by the horns, so to speak.
For more on QuickTrade’s pioneering CFD trading experience, click here.