-Introduction:
Technical analysis is a method of visual analysis, interpretation, and prediction of price movements using patterns and historical statistics to identify potential trading opportunities. In financial markets, there are two main ways to analyze the value of an asset, whether it's a currency, stock, cryptocurrency, or other securities: fundamental analysis and technical analysis. Fundamental analysis looks at the financial and economic aspects that impact the value of the security, while technical analysis examines the direction of prices and their historical movements
-What is Technical Analysis:
Technical analysis is concerned with predicting future financial price movements based on past price movements. It can be likened to weather forecasting, as it does not lead to absolute predictions about the future. However, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis relies on the assumption that price movements show specific patterns that tend to be historically consistent and statistically reliable (though no technical analysis can guarantee a specific outcome). In other words, technical analysis is less focused on predicting specific price movements and more on forecasting a range of potential outcomes based on historical price behavior
-Understanding Technical Analysis:
Technical analysis methods can be used to examine how supply and demand for specific assets affect price, volume, and implied volatility. It is based on the idea that historical trading activity and price movements in securities can be used as meaningful indicators. When combined with appropriate trading or investment criteria, these indicators may help predict future market volatility. Using various charting tools, it is widely used to generate short-term trading signals. However, it is also useful in improving the assessment of the strength or weakness of a security in relation to the broader market or its sector. Analysts use this information to help refine their overall valuation assessments
-Using Technical Analysis:
Professional analysts often use technical analysis alongside other types of analysis. Traders' decisions can be based on price charts and relevant statistics. However, analysts rarely rely solely on either technical or fundamental analysis. They always combine both to support their forecasts. Commodities, currencies, stocks, and other securities are examples of where technical analysis is used. However, technical analysis is often employed in commodity and forex markets, as traders are particularly focused on short-term price movements
-Steps of Technical Analysis:
Many technical analysts use a top-down approach, starting with a broad market analysis, then narrowing down to specific sectors or industries, and ultimately analyzing individual assets. The beauty of technical analysis lies in its versatility. Since the principles of technical analysis are generally applicable, each level of this analysis can be conducted using the same theoretical background. You don’t need a degree in economics to analyze a market index chart. You don’t need to be a certified accountant to analyze a stock chart. It doesn’t matter if the time frame is two days or two years. It doesn’t matter whether you're looking at a stock, a market index, or a commodity. The technical principles of support, resistance, trend, trading range, and other aspects can be applied to any chart. Although this may seem simple, technical analysis is far from easy. Success requires serious study, dedication, and an open mind
-What is Market Analysis?
Market analysis is a comprehensive evaluation of the market related to the company's area of activity. It is one of the elements of feasibility studies for projects, and sometimes it may precede or follow this step to enter new markets or develop certain products. This evaluation includes several aspects, the most important of which are (target market size, potential customer segments, and competitor analysis). Although it may seem somewhat complicated to some, it is crucial to understand the target market, the targeted audience, and other elements. In fact, any business owner can conduct market analysis by themselves in a few steps, as we will see. In other words, it is a more technical expression (an analytical process of available data regarding the target market) using statistical and inductive methods
-Importance of Market Analysis:
The goal of analyzing the target market is to improve the business position of your company and prepare it, enhancing competitiveness and serving potential or actual customers in the best way, also known as "improving the user experience." It also highlights your expertise in the market and its appeal to you.
Efficiently forecasting sales, which allows for determining the appropriate budget for operations.
Improving the quality of products and services while enhancing conversion rates.
Improving decision-making efficiency and identifying future insights and projections. Reaching the most optimal marketing plan, which is accurately targeted and not random or general.
Creating a competitive advantage to outperform competitors and maintain leadership, also known as "competitive analysis."
Gaining a deeper understanding of the target audience after identifying it, especially regarding their desires and expectations.
Increasing company profits, which is one of the indirect benefits that most of the company’s vital functions ultimately lead to.
Reducing risks and protecting the business, evaluating performance and the effectiveness of activities (feedback), identifying past mistakes to avoid repeating them, and correcting and adjusting what is necessary, while maintaining achievements and eliminating what needs to be discarded
-What exactly do you want to achieve by conducting a market analysis?
This means you need to identify all the motivations driving you to study the market. For example, are you aiming to achieve external goals related more to the market, or internal organizational goals? Or both? Here is an example of both goals:
- External Goals: Such as identifying who your competitors are and studying their strengths and weaknesses to exploit them, or determining who your potential customers are that you want to target, or preparing a comprehensive and strong file to convince the parties you want to borrow from or attract for investment
-Types of Market Research:
The sources of data and information used in market analysis are many and varied, depending on the type and field of the market. However, they usually fall within the following types and sources. It is worth noting the preference for primary research over secondary, as we will see:
- Primary Research (Internal Data Sources):
This refers to the process of collecting data directly by the company, either personally or electronically. Examples include conducting direct or electronic surveys about one of your products or services, or holding personal meetings with potential or actual customers to ask for their opinions, gather their impressions, and document their aspirations and desires. This also includes sources such as conversion rates, click-through rates, landing page access rates, completion of purchases, and positive or negative interactions with the project’s social media pages... and other details that help measure the user experience electronically.
- Secondary Research (External Sources):
You can obtain this by searching through government or non-government reports, field academic studies in particular, magazines, newspapers, and data available from competitors by reviewing their sales volume and customer base. Although these sources are important, they may not be as accurate as primary sources, which are more specific and targeted. Additionally, you can refer to infographics, websites, and major TV channels
-Conclusion:
Technical analysis provides a unique approach to analyzing price movement, helping to improve trading and investment decision-making. There is no right or wrong approach, and it can be combined with fundamental analysis to identify entry and exit points. Market analysis requires constant interaction with various sources and information. With a better understanding of technical analysis and economic news, traders and investors can improve their decisions and achieve successful experiences in the world of financial markets
