Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 1 - Trading Introduction
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 2 - Financial Products
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 3 - Economic Principles
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WHO USES TECHNICAL ANALYSIS AND WHY?

Although it can be incredibly detailed, technical analysis is not overly complicated. It is basically the ability to read charts and make practical use of them in your trading plan, and it would be fair to say that the majority of investors from institutions to private individuals will use it in some form before making trading decisions. The reason we study technical charts (or fundamentals) is to eliminate uncertainty as best we can, to reduce risk and increase our chance of taking profit.

People often face difficulty when using technical analysis when they adopt one procedure for making trading decisions without developing an understanding of:

  • What the information really provides
  • How this information can be applied to a given situation, and
  • Whether this decision fits in with your individual trading plan

By defining your use of technical analysis and incorporating it into a trading plan you can build a limited number of indicators which suit your style of trading and have best value to you and the market you trade. By having a limited number of technical indicators, you will eliminate confusion, and eventually devise intelligent trading strategies.

Once this happens you will:

  • Make informed decisions
  • Identify potentially profitable trades
  • Respect your own risk tolerance levels, and
  • Recognise a change in the trend before it is too late.
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