The two most common forms of analysis used by traders are fundamental analysis and technical analysis. Sometimes, these are used in combination with each other and other times, separately. It all depends on your trading style and strategy.
Technical analysis makes it easier to identify support and resistance levels. When you can do this, you can make better trading decisions as it helps you decide whether it is a good idea to invest in a specific financial instrument or not. When prices break these price points, known as support and resistance levels, that have been identified, it means that there have been significant changes in sentiment.
Technical analysis can also help you analyze trends and better understand current price action. The combination of tools that can be used can help traders pinpoint more accurate entries and exits.
Key takeaways:
- Technical analysis makes it easier to identify support and resistance levels.
- Support levels generally identify a price point at which the markets are unlikely to move lower.
- Resistance levels are prices identified in a chart that the market is unlikely to break above.