From school physics lessons we remember the following statement: any mechanical system that does not experience external forces has its own natural frequency of oscillations. This frequency is determined by the system itself, depending on internal characteristics. The same principles can be found in financial markets. R. N. Elliott, who can be figuratively called a 'classic of the genre', suggested that cyclic laws also apply to the dynamics of financial markets.
In this case, it should be understood that the market also represents a kind of 'mechanical system' with its own oscillation frequency. This also applies to the forex market. Wave analysis of forex can only be of high quality when the reference points are correctly identified. And setting them is a rather difficult task. At exactly which point do impulse figures begin and end? It is not easy to give a correct answer to the key question. And this is the main disadvantage of wave analysis. More precisely, it is a very great difficulty for correct analysis.
A trader who seriously engages in wave analysis must ensure that numerous rules and methods of channel construction are strictly followed. Sometimes a beginner, just starting to analyze the behavior of the forex market, takes on long-term price charts and makes a typical mistake. Starting to build a chart from the main high or low points, it is easy to choose 'wrong' points. But such interpretation already implies erroneous conclusions.
A wave analyst, even an experienced one, is ambushed by various kinds of 'traps' that careless traders often fall into.
Learning wave analysis is quite difficult, and very few people actually master it successfully. But you can trust professionals and use their analysis.
Many small and medium traders take into account technical analysis of forex. A series of charts allows you to see the direction of price movement. Technical analysis allows making price forecasts based on statistical and mathematical calculations. In principle, it is based on three premises:
- market movements take everything into account;
- prices change directionally;
- history repeats itself.
The initial data used are prices:
1. High and low.
2. Opening and closing prices over a certain period of time.
Trading volume is also taken into account. All factors that can affect the price are considered.
It is hard to imagine how traders would act if suddenly, right now, technical analysis data became unavailable to them. It provides significant assistance.
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