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Technical analysis is market dynamics research, mostly by means of charts, to forecast future prices movement.
There are three principles of technical analysis:
1. Price discounts everything
Price is affected by economic, political and other fundamental factors.
Some of them push the price up and others — down.
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Price and factors influencing it.
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All this information is reflected in prices. Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.
2. Price movements are not totally random, or prices trend
Trend is the main direction of the price. The main purpose of the charts is to define a trend at an early stage and to trade in accordance with its direction.
3. There are three types of a trend
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Uptrend. Price moves upwards. This trend is called bullish historically.
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Downtrend. Price moves downwards. This trend is called bearish historically.
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Sideways trend. Price is fluctuating upwards and downwards. No distinct trend forms. This trend is called flat, whipsaw, range.
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Go to «The main types of charts»
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