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.
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.