What is technical analysis?

As well as its focus on active trading, Accendo Markets has a dedicated research team which constantly analyses the markets in order to bring fresh information to its clients. This is achieved through technical analysis, a form of research. This page explains a little about technical analysis, and how it can help you as a retail trader to make the choices that are right for you.

Technical analysis, also known as charting, is the study of the financial markets in order to make educated guesses about the direction different assets may take. This is useful to traders who may need to adjust their plans in order to make the most out of their transactions. It is not without its critics – there are those who believe financial markets are far too unpredictable to study with any degree of accuracy. However, by adhering to certain rules, technical analysts can uncover very helpful information.

There are three basic ‘laws’ of technical analysis. They are:

• Securities are of greater importance than companies.
• Prices tend to follow trends.
• History repeats itself.

Analysts tend to look for patterns in the movement of asset values over given periods of time. As the trade markets tend to move quickly, technical analysis is often used to analyse asset movements over short periods of time, sometimes only a few hours. Analysts refer to charts (which is where the term ‘charting’ comes from) in order to determine how an asset has increased or decreased in value over a period of time. The length of time can be adjusted to meet the needs of the client, and so the system is quite flexible. At Accendo Markets, the focus is on derivatives trading, such as Forex, spread betting and CFDs, meaning timescales are often fairly short and trade turnover is fast. For this reason, technical analysis is an important part of the service they can offer to their clients.

The method has a long history, with some evidence of it being used in Dutch exchanges in the late 1600s. Charles Dow – of Dow Jones – made significant contributions to the practice in the 1920s and 30s, and the charting bible, Technical Analysis of Stock Trends was published in 1948 and written by Robert D. Edwards and John Magee. Some still use it as a guide today.

AccendoMarkets make use of technical analysis to inform all their packages, whether that be for CFDs, spread betting or Forex trading. The ability to deliver up to date, concise information about specified markets is a necessity. Some of the research that is put in to Accendo Markets’ information is reflected in its morning news bulletins that allow its clients to know where they stand at the beginning of each trading day. In this way, technical analysis can be used to reassure and inspire traders to make informed and clear choices about how to trade.