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TECHNICAL ANALYSIS( PROS AND CONS)

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TECHNICAL ANALYSIS( PROS AND CONS)

Post by Jacq Stone on Mon Oct 17, 2011 7:49 pm

The main strengths of technical analysis are flexibility. There is flexibility with regard to the principal instrument. A trader may easily apply his technical expertise to trade another currency when trading activity in the currency that he trade slows down.

There is also flexibility regarding markets. Trader can apply the same technical principles in every market, either spot or future markets. Finally, there is time frame flexibility. Again the same technical principles can apply to different trading styles and time frames.

However, technical analysis is not perfect. Technical analysis is done based on previous and current information. So, technical analysis has its disadvantages. The Forex market has a degree of randomness and prediction done by technical analysis will not completely accurate. It is impossible to forecast everything correctly just based on previous and current information.

Moreover, technical analysis more often gain less profit because it need time to identify the trends in chart. Thus, trader will late for a trading opportunity and takes less profit. Finally, technical analysis focuses only on charts and do not take other precise factors into consideration. Somehow, a good trading system must make use of both technical and fundamental analysis.

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Jacq Stone

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