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Technical Analysis in Relation To a Security or Index of Currency - Research Paper Example
Finance & Accounting
Pages 3 (753 words)
Name Instructor Task Date Technical Analysis In Relation To a Security or Index of Currency Introduction Technical analysis focuses on the financial instrument data in the market with the intention of forecasting upcoming price adjustments. The technical analysis takes in account only price action of the market trends that makes it simpler and easy for traders in the Forex exchange; therefore, it is a significant to analyze shorter-term price movements…
8). Currency analysis The technical analysis will help the investor to tell what price range the currency spent most of the day. Meanwhile, it will explain where did the currency break out the congestion and start upward trend. Chen (2011, p. 201) indicates that technical analysis uses price charts to give a clear understanding of the downs and ups of the currency in the exchange market. Meanwhile, technical analysis gives a prediction about the future price movements, by analyzing past price trends; hence, it is based on mere assumptions. It does not mean in case the currency experienced depreciation in past years; it will not gain value in present or future years. Therefore, the technical analysis fails to answer why currency is appreciated or depreciated, and it gives room to conclude there are various factors that are attributed to the currency changes. According to Chen (2011, p. 202), technical analysis has six price areas that can be used to forecast the prospect of the currency in the exchange market. These fields include open, close, high, low, volume and open interests, and they are used to predict the direction of the market (Chen, 2011, p. 200). ...