Binary Option – Analysis of trade
Through technical analysis trading, traders try to collect all the necessary information concerning only movement of prices in the market and one of its most important principles which is basically that markets are driven by trends and there is a whole array of factors that can influence these, it is known that the mood of investors, information available to them, and other factors can manage to influence the behavior of prices are already expressed in the chart.
One of the basic principles upon which technical analysis leans itself is that everything is reflected in the price, as it assumes that all factors that can affect the market, whether social, political, economic, speculative or any other kind of factor are already reflected in the price in a direct manner. Therefore, if a trader analyzed the price of an asset or market, what they are doing is indirectly analyzing all the factors involved in that market. By many people, this statement is considered exaggerated and pretentious, but actually all it says is that the price will reflect all changes between supply and demand which is what actually originates price fluctuations.
That is, whenever demand exceeds supply, the price rises logically and conversely when supply is greater than demand the price begins to fall. Thus the technical analyst uses this knowledge and concludes that when the price of an asset rises, it is because supply has exceeded demand and if it has a low price, it is because supply exceeds demand. It is clear that the graphs do not move by themselves as they are key factors which cause the price to rise or fall through changes in the balance between supply and demand.
However the technical analyst is not interested in analyzing or understanding the fundamental factors behind these changes, since they are only limited to study what implications do these changes occur in, which in the end, are the prices. Therefore, it is stated that fundamental analysis becomes a causal analysis used to determine why certain behaviors in the market occur in the first place, while technical analysis is an analysis of consequences, that is used to make changes occur from these fundamental factors directly without studying them.
A very important part of technical analysis is based on the study of emotions and human psychology, so basically this principle is to say that humans generally tend to behave in the same way regarding circumstances that are equal or very similar. For example, technical formations that appear in the graphs are following the “bull” or “bear” sentiment that the market has at some point, which in turn tends to behave in the same way to similar circumstances. In other words, the technical analyst assumes that if certain technical training behaved a certain way in the past, will do it the same way in the future, which can be understood by the following sentence: “The best way to understand the future is by studying the past “. These guidelines are what basically define technical analysis as a investing set of indicators.