The technical analysis is a science or else capability of predicting of future movements of price by using the data and pas movements.
Obviously, past movements may bot assure future movements as well as so the technical analysis that isn’t the 100% accurate as well as surefire predicting however if you properly learn technical analysis, you may make some correct predictions as well as so you’ll be in the profit at last.
Rules, tools, and techniques of technical analysis are ninety nine percent the similar in the forex and stock market. Therefore, if you study the technical analysis, then you may use it together in the forex and stock market.
It’s impossible to wrap everything about technical analysis with single article. Therefore, I only try to say about the technical analysis generally however write some more about it in detail.
If you study my reports of daily analysis of forex market, you’ll see that the tech analysis is major thing, which I employ in market analysis.
So I don’t use the indicators in huge time frame as four hours, daily as well as weekly charts as I believe that the indicators are also delayed that to be employed on the huge time frames. In addition, they explain the signals distant after the breakout as well as a huge move occur. Therefore, it may be very late to get in to few trades.
We’ve various price charts:
A- Tick chart
B- Line chart
C- Candlestick chart
D- Bar chart
E- Heikin-Ashi chart
F- Kagi chart
G- Renko chart
H- Point and Figure Chart
There’re few other type of charts however they’re not general I’ve not explained them in above list. Yet the Kagi, Point and Figure, Renko and Heikin-Ashi are not so common also however as I wish to say about them as I believe few of you’ll turn out to be interested by using them.
Candlestick charts, Bar charts and Line charts are so common as well as I believe that the candlestick chart that is the most general chart as well as it turns out to be more famous everyday.
The tech analysis is rooted in an analysis of charts. Searching the trends, resistance and support levels as well as too consolidations wedges, triangles, tops, bottoms, double & triple, head & shoulders and pennants and … may be done via rules of technical analysis as well as at what time you may achieve to search such things at your charts, and you’ll be capable to forecast the next movement and direction and you may get the accurate position.
The tech analysis turns out to be even much helpful as well as valuable at what time you augment the outcome with the other tools like Fibonacci and candlesticks levels. You may do the tech analysis on easy line chart. Moreover, it won’t make some difference as you’ll find the similar trends as well as formations however you do on the candlestick chart & concentrate to candlestick’s signals, and your analysis then will be so stronger.
The trendlines are general direction of price. At what time the price moves up, we’ve uptrend as well as it moves down, we’ve the downtrend.
You may find many little trends inside the huge trend. In addition, every time frame may have its personal trends that may be dissimilar from the other era frames. For instance, while you’ve the uptrend in daily chart, so you’ve the downtrend in 1 hour chart.
Finding trends is the 1st thing that we do in the technical analysis.
Just look the huge uptrend that we’ve in the EUR-USD since end of year 2005:
Nevertheless, the support level may be busted down. Generally when the support line turns out to be busted down, price moves very lower however it’s important to understand that when the support level turns out to be busted down it’ll like resistance as well as sometimes price moves up many times to recheck the busted support.
The resistance is the level, which does not allow the price move higher.
Like support level, resistance level may be busted up as well as after that act like support.
It’s time to inform you that the finding support as well as resistance level that is the basic of tech analysis. The all, which we act in the tech analysis, is rooted in the resistance and support levels that we search on charts. Even the patterns like wedges, triangles, tops, bottoms, double & triple, head & shoulders and pennants and …are made by resistance and support levels.
Few important questions:
i. Why we’ve resistance and support in market?
ii. Why do price moves up once it touches the support level as well as moves down once it touches the resistance level?
iii. What causes the resistance or support level turns out to be broken?
So these are questions which could be shaped at you mind. So it doesn’t make some difference in the trades but you understand the reply of questions mentioned above or not. so you must require to understand that what a resistance/support level is as well as how it performs. However, it’s forever useful to understand over than the fundamental.
You may be the good driver yet if you understand nothing about the engine & gearbox however expert drivers must understand about and gearbox, engine and all other spare parts of the vehicle. That is why they’re known as expert drivers. You may be a normal trader or else an expert trader. The expert traders understand about psychology of market.
Why we’ve the support levels here in market?
We’ve resistance as well as support level in anything. Such as in weather changes. So it turns out to be hot in the summer however it has the limit in various regions. And it does not move up to the extent that it can. So there’s the level of resistance in various areas. Each year the temperature moves up, rechecks the resistance as well then moves down. It’s similar in the Winter. Temperature moves down however it does not move lower than the particular level in various regions.
What stops temperature from moving over or less a particular level? There’re various factors like atmosphere as well as geographical conditions.
It’s similar like forex market as well as all types of markets.
The traders purchase and vend as well as the price moves higher & higher but may the trader continue purchase for the good? Or else will they have a vendor to vend his or her shares anytime, which they wish to purchase?
Absolutely not for the reason that they’ve limitations. They may not afford to purchase more than the particular limit as well as at what time majority of the purchasers get to their limits, and they stop purchasing as well as begin vending slowly and therefore price will be closed from moving up and begins move down slowly. After that other purchasers who had save their positions, turns out to be realized that price won’t mover higher as well as will move down. Therefore, they vend and price moves down very faster.
Conversely, at what time you wish to purchase, a vendor must be found on the other part of market. Or else, you may not purchase. And it’s very clear that you may not find the vendor at some condition as well as vise versa.
So this sequence will be recurring over & over but every time when purchaser get in to their limit stage, they stop purchasing. When we’ve the uptrend-like EUR-USD chart that you may see. Every limit will higher than previous 1 because the purchaser turn out to be stronger as well as their purchasing limit moves higher as they’ve earn income in their past trades. Therefore, we yet have the limit stage which higher than previous stage.
The support stage has the similar story. It’s the stage that the whole purchaser finish vending as well as after that begin purchasing and so price moves up once more. At what time you connect with the vending limits to one another, you’ll have the support stage.
So what causes the resistance or support level turns out to be broken?
There’re several factors, which causes the resistance or support level turn out to be broken. The positive or else negative change in economic situation is most vital factor. Such as, a big state just like United States of America makes decision to attack on the Iraq. This informs that the traders as well as an economic condition of United States of America will be meeting with few problems due to the great expenses of the war. Therefore, they don’t continue investing in the United States of America as well as stop purchasing United Stated Dollar.
Conversely, those who by now purchase the Unite States Dollars start vending because they consider that if they do not do like this; they will mislay many when the worth of United States Dollar moves down. In addition, few of investors that had invested in United States of America, get their capital out as they’re scared that the economy of United States will move down as well as they may not earn some profit or else they’ll lose. Therefore the worth of United States Dollar moves down against other currencies as well as so many strong resistance or support levels turns out to be broken.
Anyhow, you would better to understand that what causes price to move up & down however for the trading consistent with the tech analysis, we only require to find resistance and support levels as well as understand that at what time it’s the era of purchase or sell.
At what time you find resistance and support levels via tech analysis, then you wait for price to recheck the support. And if it may not rupture down support as well as moves up, you get the long position as well as it breaks down a support, you get the short position.
In addition, at what time price rechecks the line of resistance as well as not rupture it up, so you get the short position & if it ruptures up a resistance, you get the long position.
At what time price moves up or else down a little bit, it only stop moving up or else down as well as makes few little fluctuations. All such events have physiological causes concerned to purchaser (Bulls) and vendors (Bears). Such as, the purchasers stop purchasing as well as wait for other traders. So if the other traders continue purchasing, price will move up and therefore those who’ve been waiting, begin purchasing also. This period of waiting in market makes the consolidation in price charts as well as when price moves up once more, the consolidation then will be called continuation signal.
The consolidations explain the indecision of marketplace. A price does not understand that if it must move up or else down. It’s era that we must plot the resistance and support levels and await the breakouts.
The consolidations make the various shapes as well as patterns. I only mention few of patterns, which turns out to be shaped by resistance and support levels however I’ll write various articles for one of them.
A. Double Tops
B. Triple Tops
C. Double Bottoms
D. Triple Bottoms
E. Head & Shoulders
F. Ascending, Descending and Symmetrical Triangles
G. Ascending & Descending Wedge
H. Flags or Pennants
Few of consolidations work like continuation signals. Such as, pennants or flags are continuation signals. In addition, it means that the price will continue going to the similar direction which it has going before the shaping of flag.
Few samples or patterns are the reversal signals. Such as Head & Shoulders as well as Double Tops which are top of the uptrend are the reversal signals as well as the price must move down after such patterns however from time to time they are not succeed to perform like reversal and therefore the price continues going to the similar direction.
Therefore, I don’t wish to make the article very long as well as I’ll tell about patterns in various articles. Just stay tuned!