Trading Analysis

Let’s go technical!
Technical analysis is the process of analyzing historical data over the price of an asset and other statistical data generated by market activity, in a try to define probable future prices.

For many years, traders in Forex and stock exchange market have found that one successful way to forecast the possible future movements in rates is to analyze their behaviors of the past. This approach dates back to the 1800s, and it is called technical analysis. It has gained a more extensive usage started in 1990 because of the internet, computer and applied mathematical models and advanced charting techniques.  

Technical Analysis with Charts

Organizing price patterns and visualizing them as a chart is one of the classic technical analysis techniques. Charts are historical records of price movements that give important information needed to analyze the trend of the currencies. There is no standard way to interpret charts, but having the right expertise to take out of them the most valuable information which is able to help on the prediction of future price movements. 

Pattern recognition is a hands-on and intensive work requiring careful interpretation of the price charts. Below, there are introduced various chart patterns, and you can combine them or even use other patterns which might adapt better to your trading strategy. 

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In a bar chart price is reflected by a bar. The length of this bar is determined by the highest and lowest price of a trading period (e.g., a day). Small horizontal tics may be used to designate opening and closing prices for this trading period. 

A Candlestick is a chart that gives a nice picture of market prices. The body of the candle represents the difference between the open and the close for a period. If the opening rate is higher than the closing rate, the candlestick is solid. When the closing rate exceeds the opening rate, the candlestick is hollow.

Trend lines are lines drawn that connects either a series of highs or lows in a trend. They are used to track the progress of price movements.

A resistance level is a price level at which a rising market has stopped advancing and will either move sideways or begin to decline. Support and resistance levels are psychological barriers that cause temporary changes in the underlying trend of the market.

Charts can be generated hourly, daily, weekly, or monthly basis. You will choose charts to study depending on how long you plan on holding a position. If you are trading short- term, you need to look at 5- minutes or 15- minute charts. If you plan on holding a position for a couple of days, you will look at an hourly, 4- hour or daily chart. Weekly and monthly charts compress price movements to allow for much longer-range trend analysis
RSI attempts to estimate the market’s current strength or weakness during a given period. It is an oscillator which measures the ratio of upward to downward movement for a given instrument over a specified period of time. The time period used affects the RSI dramatically; the shorter the interval used the more sensitive will be the corresponding move in RSI.
Stochastic is a popular oscillator to judge price momentum. It measures the close of a price in relation to its range and is represented by a ratio multiplied by 100. The concept for Stochastic is based on the tendency that as prices move higher, the intraday closes will be closer to the high of the daily range. The reverse is true in downtrends. Values over 70 indicate overbought condition while values below 30 indicate oversold condition.