5 fundamental rules to operate based on technical analysis

1. Have a system and an iron discipline. If you abandon it and go to the trailer of market psychology, it is very likely that you will fail. For a day, we can change our minds often and what seems like a good purchase can become a disaster in a matter of hours If you have no references to operate and you rely on hope, you are lost.

2. If you have set a stop level, stick to it. It is better to be faithful to a work dynamic and to assume a small loss than to lose capital or discipline. If you do not get profits, analyze why. The fundamental virtue is always to be fresh and ready to take an advantageous position. Avoid supporting positions against yourself or having a position without technical references.

3. Try to avoid euphoria or discouragement. This is not an easy task, as often objective prices explode and quotations rise sharply. Other times pessimism dominates the atmosphere; it is in this type of situation that you will be able to do your best work. The psychological climate is normally a trap, and it is important to know how to avoid it.

4. Set objective prices It is better to undo an advantageous position at a reasonable price than to abandon it to one's fate. Unless the position is taken in a primary market floor it is best to be disciplined with the price targets.

5. Tend to buy on media and sell in resistors. Often, these levels are clear and many people can see them. A bullish trend usually returns to the support zone, this zone often gives the buy signal although it seems that the market is deteriorating. And a drop after a new maximum is a buy signal, a rebound after a new minimum is an exit signal.

A Successful Trader and His Workplace

So, you are a forex trader. You have: repeatedly tested reliable trading strategy, ability to control risks and keep your emotions in the fist. Is this sufficient for profitable trading in the foreign exchange market? Someone will say - quite. But we will allow ourselves to object - no, this is not enough. A very important role is played by where and how you trade, and what your working environment is. As you may have guessed, today we will talk about the workplace of the trader and how it should ideally be.

WHAT SHOULD BE THE COMPUTER FOR TRADING?

[caption id="attachment_660" align="aligncenter" width="478"] successful trader workplace[/caption]

We do not need to launch satellites into space, so a super-powerful computer does not need a trader. However, in extreme cases it is also not worth hitting - the ancient "calculator" is hardly suitable for a successful trader. It is enough that the trading terminals used by you work quickly and do not hang up, and the resources of the machine allow you to work without a slowdown in the browser, watch videos or use other programs.

It is very important to have at hand some kind of duplicating electronic device. It can be a simple laptop or even a smartphone, good, now almost every forex broker has a mobile trading platform. This is in case the computer (unexpectedly, as always) refuses to turn on, the Winchester will fly, the cooler will die, etc.

ON WHICH MONITOR IS BETTER TO TRADE

In the feature films of Wall Street, the trader's workplace is equipped with monitors from all sides, including the monitor behind the eyes at the back of the head. It's all superfluous. You can hang monitors from head to foot, but you will not trade better.

One monitor for comfortable trading is enough. And it's better if he will be with a diagonal of 19 to 24 inches. This will allow you to comfortably trade, and watch a movie or video about ridiculous seals while you rest.

DO NOT FORGET ABOUT THE INTERNET

For the modern Internet, the proverb "the faster - the better" is applicable. We believe that this does not need explanations. However, even after carrying out the optical fiber and getting the speed of 100500 Mbps, do not relax. You need to have a backup plan, in case the Internet (as always on time) disappears.

It can duplicate the line from another provider, 3g-modem or smartphone in modem mode.

I'M AT SEA, AND MY ASS IS SOMEWHERE ON THE CHAIR ...

Do not underestimate the importance of what you are sitting on. In the human body, everything is interconnected. The spine is directly related to the work of the brain, headaches and your general condition. What will be your efficiency if you sit at the computer for a half-hour on the kitchen stool?

Do not regret money and buy yourself a good computer chair. Do not skimp on health, but earn money.

DOES THE TRADER NEED A PRINTER?

Strictly speaking, if the previous items were mandatory, then this item is optional. The presence at your work of a printer, or even better than an MFP, which combines a printer, a copier and a scanner, will make the trade more convenient.

You can print the necessary graphics, draw on them with a pencil or marker, make tables and posters for yourself with important information, etc. Very well, if it does not lie on the table, but hang on the wall before your eyes.

AND, PERHAPS, THE MOST IMPORTANT

Finally, we left the most, according to our experts, for trader, the main requirement for the workplace of the trader. It is the need to share personal life and workspace. Agree that there can be no question of any effective trade if, next to you, "As I remember, Varya dies, Ivan Izrailevich in the next room, crushed by a piano ..."

If there is a possibility, then it is better to allocate a separate room for trade, where nobody will disturb you. Suppose the option and removal of the office. Let the word "office" do not scare you - it can be an ordinary small company, where no one will interfere with you (do not forget to warn your wife, but how could something not work :)).

How do you see your ideal workplace trader? Share in the comments.

The Main Postulates of Technical Analysis on Forex

The technical analysis on Forex as a whole can be defined as a method of forecasting the price dynamics, based on the observation of the charts for the previous periods of time.

LET US SINGLE OUT THREE BASIC AXIOMS OF TECHNICAL ANALYSIS

The price takes into account all factors

Any factor, such as economic, political or psychological, has already been taken into account and is reflected in the price chart. In other words, changes in demand and supply are reflected in the price movement. If the demand for currency exceeds supply, then it begins to grow, and vice versa - if the supply exceeds demand, it falls.

Price moves directionally

The main task of technical analysis is to determine the direction of price movement for use in trade.

Hence we can distinguish the following:

a) The current trend always has a desire for development.
b) The current trend moves until it begins its reverse movement.
c) Trade only in the direction of the current trend.

History repeats itself

It is based on the assumption of the constant psychology of the crowd. If some time ago the situation developed in a certain way, then there is no reason to believe that under the same initial conditions, market participants will act differently.

Line Break Charts

Introduction to Line Break Charts

The linear breakout graph is a set of vertical rectangles (called "lines"), which are built on the basis of closing prices. In this method, the time axis and transaction volume data are not used (similarly with the tic-tac-toe charts, Kagi and Renko). As Steve Neeson says in his book "Beyond the Limits of Japanese Candles": "The linear breakout graph is a more perceptive form of Xeroxes when the turns are determined by the market, rather than arbitrarily defined rules." The linear breakout graph looks like this:

Drawing a linear breakout graph

The construction of the chart begins with the determination of the base price and the comparison of the base price with the closing prices of the subsequent bars.

The first line (baseline)

• A white line is drawn if the closing price of the current bar is greater than the base price;


• A black line is drawn if the closing price of the current bar is less than the base price.

The second line

Draw the next line (in the next column) WHITE, if its maximum is higher than the high of the previous WHITE line;
OR
Draw the next line (in the next column) BLACK if its minimum is below the low of the previous BLACK line.

The third line

Draw the third line (in the next column) WHITE, if its maximum is higher than the highs of the two previous WHITE lines;
OR
Draw the third line (in the next column) BLACK if its minimum is below the minimums of the two previous BLACK LINES;
OR
Do not draw anything on the chart if the new price is within the range of the two previous lines.

The subsequent lines are drawn according to the conditions for the third line until a linear breakthrough occurs. Also, note that the prices of new bars should EXCEED a maximum or a minimum of the previous lines.

A linear breakthrough

If three successive BLACK or WHITE lines are formed on the linear breakout graph, this confirms a bearish (BLACK) or bullish (WHITE) trend. In this case, the reversal will take place only if the price of the current bar is below the low of the previous three lines (in the case of a reversal of the HIGH trend) , or the price will be higher than the maximum of the three previous lines (in case of a reversal of the BEAR trend) .

Case A. Three consecutive white lines

Draw the WHITE line (in the next column) if today's maximum is higher than the maximum of the THREE WHITE LINES;
OR
(ROTARY LINE) Draw a BLACK LINE (in the next column) if the current minimum is below the minimum of THREE WHITE LINES.

Case B. Three consecutive black lines

Draw the BLACK line (in the next column) if the current minimum is below the minimum of THREE BLACK LINES;
OR
(ROTARY LINE) Draw the WHITE LINE (in the next column) if today's maximum is higher than the maximum of the THREE BLACK LINES.

A new line (BLACK or WHITE) is added to the next column if the current maximum is higher than the high of the previous WHITE line or if the current minimum is lower than the low of the previous BLACK line.

If there are three consecutive BLACK or WHITE LINES on the chart, the DOT LINE is drawn only if the current maximum is higher than the highs of the three previous white lines, or if the current minimum is below the lows of the three previous black lines.

We apparently that the turn occurs when the price should "break" a maximum or a minimum of the three previous lines. Such graphs are called three-line breakout graphs. The linear breakout graph can be constructed not only for three lines but for any number of them, for example, for 2 or 18 lines. But the most common are three-line graphs.

Trading on the graphs of a linear breakout

The linear breakout graph shows the changes in the main trend in the market. Confirmation of a trend change is generated when a reversal line is formed. In this way:

Buy when the white line appears after three consecutive black lines;
Sell when the black line appears after three consecutive white lines;
Avoid trading in markets with no trend, when the black and white lines on the chart alternate.

However, such a confirmation of the trend may be late, and the bulk of the new movement can already be completed. But traders usually prefer to wait for such confirmation, which is a kind of compromise between risk and profit.

Most graphical analysis techniques can be applied to linear breakout schedules. They can have figures like "Double top" or "Head and shoulders", trend lines and support / resistance levels.

Introduction to Kagi Charts

Kagi charts, consisting of thin and fat vertical lines, connected by short horizontal lines. The Kagi schedule was developed in Japan in the 1870s with the beginning of the development of the Japanese stock market. This technique was used to determine the movement of the price of rice. The word "Kagi" comes from the Japanese art of printing, it is a plate in the form of a Latin letter L, used to align a sheet of paper for printing. Western traders discovered this technique by Steve Neeson in his book "Beyond the Limits of Japanese Candles."

The graph of Kagi does not have a time axis. The graph of Kagi looks as follows:

[caption id="attachment_496" align="aligncenter" width="536"] Kagi Charts[/caption]

The thickness of the lines Kagi (Kagi) varies depending on the price action. The thick line is called the Yan line, and the thin line is called the Yin line. The points where the direction of the line changes from the top down, are called "shoulders", and the points of change from the lower direction upwards are called "waists".

When the line Yin (thin) moves above the previous "shoulder", it becomes the line Yang (fat). Similarly, when the Yan line moves below the previous "waist", it becomes the Yin line.

How to make Kagi Charts?

Note the first closing price. It is called the "base price".

1. If the closing price of the next bar is greater than the closing price of the previous (base price), draw a bold vertical line (yan) up from the price of the first bar to the price of the second bar.


2. If the closing price of the next bar is less than the closing price of the previous (base price), draw a thin vertical line (yin) down from the price of the first bar to the price of the second bar.


3. If the closing price of the next bar is equal to the closing price of the previous one, do not draw anything. Wait until the completion of the third bar and compare the price of its closure with the base price.


4. If the closing price continues to increase (or decrease), continue moving the line tochart up (or down) to the closing price levels of subsequent bars, regardless of how small or large the movement is.


5. If the closing price starts moving in the opposite direction, but the movement value is less than a certain coefficient of reversal, then this movement is ignored, and nothing is entered on the chart.


6. If the Kagi line moved up and the new closing price fell by an amount greater than a certain reversal ratio, then draw a short horizontal line (called the "inflection line") on the chart, and then - a new line down to the level of a new low closing price.


7. If the Cagi linemoved down, and the new closing price rose by an amount greater than a certain coefficient of reversal, then draw a line of inflection on the chart, and then - a new line up to the level of a new high closing price.


8. The coefficient of reversal, showing the amount necessary for a turn, can be expressed in absolute values ??(for example, 100 points) . If the magnitude of the reversal ratio is high, it will allow you to stay in a lucrative transaction longer, however, you will lose somewhat more profit when you exit the transaction. If the value of the reversal ratio is small, you will save more profit when you exit, but you will often have to exit transactions.

How to interpret Kagi Charts?

The simplest way to interpret the graphs of Kagi can be described by the phrase Stephen Nison "Buy on Yan, sell on Yin."

When Kagi's line of thin becomes fat, prices have risen above the previous high - it's a bullish signal. The converse is also true: if Kagi's line of fat became thin, then prices fell below the previous low - this is a bearish signal.

Support / resistance levels, graphical analysis, and trend analysis methods can also be used on Kagi charts. In fact, it is even easier to determine the levels of support or resistance.

Another way of interpretation, indicated by Steve Neeson, is to find a sequence of 8-10 (often going one behind the other) "shoulders" or "waists." Usually, after this, a strong movement in the opposite direction is expected.

Introduction to Renko Charts

Renko Charts are one of the types of graphs created by Japanese traders. One of the main differences between the graphs Renko from charts bars, lines, or Japanese candlesticks is that Renko does not include any time or volume of trading. It is believed that the name of the graph comes from the Japanese word brick "renga".

In Europe and the US, Renko's graphics became popular after the publication of the book "Beyond the Candlelight" (Beyond Candlesticks).

Building Renko Charts

The Renko charts are constructed as follows: the closing price of the current period is compared with the levels of the minimum and maximum of the previous "brick" (white or black). If the closing price of the current period rises above the maximum of the previous "brick" at least by the size of the "brick", then on the graph in the new columns one or more white "brick" is drawn.

If the closing price of the current one falls below the minimum of the previous "brick", not less than the size of the "brick", one or more black "brick" is drawn on the chart.

If the closing price moves below the minimum or maximum of the previous "brick" to more than one "brick", but it is not enough to form two "bricks", only one "brick" is drawn.

Thus, a new "brick" appears on the chart , if the price passes the maximum or minimum of the previous "brick" by a certain amount (the size of the "brick"). Accordingly, the frequency of appearance of new bricks depends only on the movement of the price of the asset and does not depend on time. All the bricks on the chart are the same in size, which is determined by the trader in their own technical analysis program and should be more or equal to the minimum price change of the asset. For example, if you are building a Renko chart with a brick of 20 points, an upward movement of 100 points will look like 5 white bricks.

Usually, for a trend upwards, white bricks are used, and for a trend downward painted bricks, but in each program of technical analysis, their colors can be used.

Many trading software like MetaTrader allows you to draw Renko charts, using custom indicator.

Advantages of Renko Charts

Using graphs Renko (Renko the Charts) believed that the graph Renko is a very effective tool to identify key levels of support and resistance, since the filter main trend of the asset, not considering minor fluctuations in prices. The main signals to the entrance to the market appear when the direction of the trend changes and accordingly the color of the "brick" becomes different.

For example, an order to sell comes when a series of white ends, and the first black brick appears. An order to buy occurs when a series of black bricks ends, and a white brick appears.

Notes:

Because Renko Charts was created to determine the main trend of the asset, the chart itself gives a lot of false signals, especially on lateral movements and short trends, but it almost always allows you to catch the main part of the big trend.

Renko charts are always built based on the closing prices of the period they are considered, so when they are created from charts of another kind with different periods, the result may be different. The larger the scale on which the Renko chart is based, the greater the likelihood that its main flaw will be manifested - changing its readings in real time, so it's best to build Renko's graphs based on tick or minute data.

Limitation of Renko Chart

On the Renko chart, you can use the same types of graphical and indicator analysis that charts of bars and Japanese candles predict; however, one should take into account a number of points:

• on the Renko chart, the minimum and maximum of the white "brick" always coincide with the opening and closing prices, respectively, and the minimum and maximum black brick, on the contrary, with the closing and opening prices of this "brick", so the indicators using the calculation of the prices of opening, closing, minima, and maxima within one "brick" may not work correctly.


• since there is no volume in the Renko chart, the indicators taking into account the volume will not work at all.

Creating Graphs of Tic-Tac-Toe (Point and Figure charts)

Graphs Tic-tac-toe are a special type of graphical analysis, which emphasizes the forecasting of medium and long-term trends.

Creating graphs of Tic-Tac-Toe (Point and Figure) :

Most of the most popular charts used in the technical analysis are built at opening, closing, high and low prices for a certain period. In the construction of the Krestikov-tozikov charts, only the closing price of the period is involved.

Charts Tic-Tac-Toe consists of columns X and O, who take filtered reflect the price change. Price growth is shown by X cells, and prices drop by O cells. New cells are drawn only if the price has changed by the cell size or more in one direction.

Thus, each graph has a setting, called the size of the "cell" - a conventional unit of the size of the price movement, which is displayed on the graph. The size of the "cell" is the number of points at which the price should pass above the current cell X (or below the current cell O) so that a new cell X (or O) is added.

For example, if the price has increased by three established cell sizes, then on the graph this will be displayed as three X cells.

[caption id="attachment_474" align="aligncenter" width="30"] three X cells[/caption]

If the price movement unfolds, a new column appears on the chart, where the cells "O" will be displayed. In this case, X and O never appear in the same column.

In addition, each graph has a "turn-up threshold" setting, which determines the number of points necessary for the next column to appear, and the graph starts to move in the opposite direction (down if the previous column was X and up if the previous column was O). Only when the reversal threshold is overcome by the price, next to the previous one a new column is drawn, only moving in the opposite direction.

Thus, if the security is moving, for example in the upward trend, the until it passes down the distance a reversal threshold (typically several cell acts as a threshold size, e.g., 3) schedules will show the growing column X. Similarly, the column O is displayed.

It is necessary to remember two important specific moments.

• There is no linear time scale on the crosses-toe charts, so each column can be a few minutes, or maybe several days, depending on the nature of the price movement.


• The cell on the cross-toe chart does not show a specific value of the price, on the contrary, it shows a certain range of values that is within the cell's range.

Signals of the charts Tic-tac-toe (Point and Figure)

Signals of the trend reversal.

• The emergence of a new column O is a signal for sale


• The appearance of a new column X is a signal to buy.

Support and Resistance Levels

Because of the features of the Tic-Tac-Toe graphs, support and resistance levels are always horizontal lines. The level of support appears on the cross-toe chart if there is a series of consecutive columns O, whose minima are on the same level.

The resistance level appears on the graph crosses and toes if there is a series of consecutive columns X whose maxima are at the same level

It should be remembered that the XO chart points not to a certain level but to the support zone (equal in size to the cell size), since the location of the minima of several columns O at one level does not mean that prices stopped at this level, and indicates only that they did not go below more than one cell. The same applies to resistance levels

Trendlines

Because of the characteristics of the tic-tac-toll charts, support and resistance levels are always lines with a slope of 45 degrees.

It should be noted that the current position of the trend line on the cross-ticks schedule will in most cases not coincide with the position of the same line of bars and candles on the chart. The reason here is that, firstly, the cross-toe chart does not reflect the actual minimums and maximums of the market, but indicates their position only in the cell range, and secondly, the time scale is nonlinear.

Patterns on the charts Point and Figure

Double top

Triple top

Break of the trading range

Head-shoulders

Decreasing triple top

Breakout of an upward trend line

Acceleration of a downward trend

Rectangle

All of the above patterns have their own mirror images for breakouts up.

Advantages of the Tic-Tac-Toe

• They provide clear signals for buying and selling, without any duality.


• They take into account only "significant" price changes and filter out market noise. In this case, the "significance" of changes is set by the trader.


• Remove the time effect, which sometimes introduces an additional element of uncertainty on ordinary graphs.


• They allow you to determine levels of support and resistance, as well as trend lines.


• They are simple enough to understand

Disadvantages of Tic-Tac-Toe

The charts give good signals only for medium and long-term periods and are not intended for short-term trading.

Brief classification of methods of technical analysis in Forex

Methods of technical analysis fall into a number of categories:

1. Graphical methods of technical analysis

In graphical methods, a conventional or transformed market image (different types of price and / or volume chart ) is used for analysis. Usually, these methods are based on any repetitive patterns (patterns) of price behavior. Most of them appeared before the rest of the groups, practically does not require the use of complex software and is fairly easy to use. Graphic methods usually include classical market models, trend lines, support and resistance, channels, Japanese candles, crosses, zeros, etc.

[caption id="attachment_409" align="aligncenter" width="396"] methods of technical analysis[/caption]

2. Digital filters and mathematical approximation

Methods using filtering or mathematical approximation of price series appeared long ago but actively began to develop only a couple of decades ago, which was due to the massive emergence of personal computers.

These methods are conventionally divided into a number of categories:

• Trend indicators. Trend indicators show the strength of the main trend of the market and its direction, for example, Moving Average, Directional Movement, Parabolic, Kaufman Efficiency Ratio, etc.


• Indicators of volatility (volatility). Indicates the strength of market volatility, the strength of movements not depending on the main trend, for example, Standard Deviation, Bollinger Bands, etc.


• Acceleration (torque) indicators. This very broad class of methods is used to determine the current rate of change in price (acceleration). These include most of the oscillators, for example, Momentum, Relative Strength Index (RSI) and Price Rate-Of-Change (ROC), Stochastic Oscillator, etc.


• Methods for determining the cycle. These include various indicators that use the basis of Fourier spectral analysis or the construction of trigonometric curves.


• Methods of volume research.This class of indicators uses the time series of the volume of trade as the main data and is used to determine the strength of the market movement since it is considered that the greater the volume of trading, the more investors "believe" in the movement, and therefore it is not false.


• Indicators of support and resistance levels. Methods that indicate that the current movement is likely to stop at a certain level, for example, Moving Average Envelopes, Fibonacci Retracements, etc.

3. Probabilistic methods of technical analysis

Methods using methods of probability theory and mathematical statistics to determine the strength of the trend, the probability of correction, etc., for example, the market profile.

4. Theories of market structure.

Methods that use as a basis the assertion that the price movement has a clear unchanged structure that allows one to predict its further behavior. These methods include Elliott waves, fractals, etc.

5. Miscellaneous

There is also a wide variety of methods that can not be considered a single group. Quite often there are trading systems that trade on the basis of data on the electromagnetic field of the earth, solar activity, lunar cycles. There are companies that supply this data in real time.

According to estimates, technical analysis is the most popular class of methods. To some extent, it is used by about 50% of traders.

Technical analysis of Forex

Technical analysis is a method of forecasting prices based on information about market quotes, volume and open interest.

The main of these three components is the price. The study of prices by methods of technical analysis is most convenient, since information about the price, as a rule, is publicly available, has a long history.

Note: in the Forex market, technical analysis uses data only on prices and tick volume (the number of quotations), since data on actual volumes are not available, and open interest is not calculated.

The technical analysis differs from other types of research also in that it is based on mathematical, statistical, and not economic calculations. All methods of technical analysis were developed separately, so there is no strict system, there is only a set of methods or techniques, from the simplest (graphical analysis) to supercomplex (for example, neural algorithms). Moreover, often different separate methods of technical analysis contradict each other. The only thing that connects these individual techniques is the general principles and axioms.

Technical analysis is based on three postulates, which are also sometimes called axioms.

1. The course took into account all the factors that affect it.

In classical (factorial) analysis, it is assumed that the exchange rate is formed as a result of the action of supply and demand for the currency, which depends on a large number of factors (economic, political, psychological or other, as well as their interrelationship). If the demand for currency exceeds supply, then the rate increases, if on the contrary, it falls.

Technical analysis (TA) changes the cause and effect in places and says: if the rate increases, then demand exceeds supply, if it falls, then vice versa. Thus, TA argues that since all factors are already present in the price chart, there is no need to study them. There is a price history, and it is enough to predict the future.

[caption id="attachment_404" align="alignleft" width="250"] Technical analysis of Forex[/caption]

Fundamental factors do not influence the price independently but through the opinions of buyers and sellers. It is clear that how many people, so many opinions (and in this case, expectations, forecasts and actions), so the only objective indicator is only the actual price and volume of trades. Price is an opinion that everyone has already expressed, so even if the factors influencing the opinions of investors have changed, it does not matter as investors have already taken action and changed (adjusted) the price. The market has already been "pawned" (dealer jargon) under the fundamental factors.

By this statement, TA differs from another kind of analysis - the fundamental one, which asserts that the price depends on supply and demand, and hence on a large number of factors. According to the fundamental analysis, by forecasting these factors, you can predict the price.

Technical analysis has become particularly popular in connection with the development of the theory of market efficiency (Efficient Markets Theory / Hypothesis), which claims that using analysis of fundamental factors (in the jargon of the "foundation") it is impossible to obtain a yield above the market average.

Like any analysis system, TA is not without its shortcomings. Usually, the criticism of the first postulate goes on two points.

• In the market there are "shocking" (in the sense of unexpected) news that investors could not predict: the speeches of officials, the actions of central banks, natural phenomena, etc. (although it is worth noting that fundamental analysis here will not help, because the unexpected news is unexpected for everyone).

Not all investors receive information at the same time. Someone is trading in the short term and watching the news online. Someone analyzes daily or even weekly charts and learns information from newspapers.

• Price movements tend to be believed that one of the basic concepts in technical analysis is the notion of trend or trend. In technical analysis it is believed that the market is always subject to one or another trend, and the continuation of the existing trend is more likely than its change. Therefore, the main task of the technical analyst is to identify, at early stages, the termination of the old and the development of new trends.

 

There are three main types of trends:

• The upward trend (up closeup Trend) - upward price movement, it is sometimes called a bullish trend (bullish Trend) ;


• Downward trend (down Trend) - the price movement down, sometimes called bearish trend (bearish Trend) ;


• Sidetrend (sideways - outset, trading range - trading range) - the price is practically not moving.

 

All three types of trends are not found on the market in pure form.

There are a huge number of methods that determine the type of trend present at the moment in the market. One of the simplest and oldest is the Dow theory. According to Dow theory, there is an upward trend in the market if each subsequent peak (local maximum) and each subsequent decline (local minimum) is higher than the previous one. On the contrary, the market develops a downward trend, if each subsequent decline and each subsequent peak is lower than the previous one. A lateral trend exists when none of the above conditions is met.

The most frequent criticism of the postulate is that it is simply trivial. If the prices are in motion, then they can not move anywhere, and therefore have a tendency. Thus, the postulate states that the water is wet.

3. History repeats itself.

This, perhaps, is the main postulate of technical analysis and if it were not there, TA would not make any sense. It is believed that the psychology of both the individual and the crowd varies from year to year insignificantly, its basis remains. The crowd of investors in similar cases takes similar decisions, which means that if any scenarios have worked in the past, then other things being equal they will work in the future. Therefore, the key is understanding the future movements lies in the price history.

Thus, technical analysis is a kind of set of mathematical and statistical methods of studying human psychology, expressed in price.

The most frequent criticism of the postulate is:

• The situation "with other things being equal" does not exist in nature.


• The market is a self-learning reflexive system. Therefore, if traders saw that event "B" occurs after the specific event "A", the next time after the event "A" they will make market decisions, express them in price, change the causal relationship and get the "B +" event as a result. In the next cycle, traders will see that event "B" or "B +" occurs after the "A" event and will make other decisions.


• Methods of technical analysis themselves affect the market because it is through them, indirectly made decisions about buying and selling.

 

Advantages of technical analysis.

• Technical analysis is equally applicable to different types of markets. Trends in the market of grain or orange juice can also be studied as trends in the market of currencies or government bonds.


• Technical analysis does do not require such a large amount of expensive and diverse statistics, as required, for example, fundamental analysis. All that is necessary for him is a price history for a specific trading instrument for a sufficient period. This price history and the technical means (software) of its analysis are generally available and free of charge.

How does Technical Analysis work?

Once, between the adherent of technical analysis and the fundamental investor, a dispute arose over the operability of technical analysis. The fundamental investor sent his opponent a line chart and asked to predict the movement of the market. He did not provide any more information. Was it an action , an index, a raw material or some other asset ? Was it a tick chart, minute, hour, day, week or month? Perhaps it was a randomly generated line on the chart? A trader practicing the use of technical analysis replied that the market, probably, will continue to do, what does (and he at that moment grew up), but may fall. How did he know what would happen the next day with the line on the chart? Perhaps in this way the investor wanted to prove to himself that technical analysis does not make sense. But this he did not prove anything. He just asked the wrong question and got nothing meaningful answer.

As Edward Denning said, "If you do not know how to ask the right question, you will not find out anything." What should be the correct question? Albert Enstein, who once wrote: "If I had one hour to solve the problem, and my life depended on it, I would have spent the first 55 minutes on the correct formulation of the question. Because, as soon as I correctly formulate the question, I can solve the problem in less than five minutes. "

It is very important to know what the technical analysis suggests in one or another. Before a trader can confirm or disprove his hypothesis, he must first understand whether his underlying assumptions are true or false.

What is technical analysis?

Technical analysis is based on information about price and volume, correct interpretation of this information can predict the changes in the direction of price movement with high probability. Specialists in technical analysis use graphs as a visual representation of price movement. Before computers were widely distributed, traders had to look at the print ribbon to draw the same information, and draw the charts themselves. However, do not forget that the fundamental factors are often reflected in the graph. Sometimes the price movement lags behind the fundamental factors, so in this situation, the price will continue to move even after the fundamental factors change. In other cases, fundamental factors can exert a leading influence,

Each bar on the chart is the culmination of the opinion of millions of market participants and, accordingly, the formed demand and supply. Participants entering the market express their opinion about the direction of the asset in the future, and the price of the asset moves in one direction or another. They buy, if they believe that the price will rise, and sell, when they believe that the price will fall. If they do not have a definite opinion, the price, most likely, will not move or will be in lateral movement. The technical analyst is not interested in why the market participants came to this opinion. He's just trying to figure this out by looking at the chart. Therefore, technical analysis studies the behavior of the market, which is reflected in price and volume.

Studies show that people act reasonably predictably when they find themselves in similar circumstances. The market is growing and falling due to certain psychological prejudices and reactions of market participants. History can be repeated, but not with 100% accuracy. Therefore, the technical analyst should be judicious, trying to form an opinion on the future direction of the price movement. With that said, technical analysis is more of an art than a science. The price chart, most likely will not tell the trader anything, if there is no context and additional information about the intentions of market participants. Technical analysis is a tool. But no instrument, fundamental or technical, can accurately model and predict what will happen in the market, it can only help increase the chances of opening a successful transaction. Trading is a game of probabilities, so when opening a deal, you need to use all available methods and means to get the odds on your side.

How to use technical analysis?

Having dealt with what is a technical analysis, you need to decide how to use it. Do not look at the chart, try to predict what the market will do the next minute, the next day, a week or the next month. This is silly. The correct question that a trader should ask when looking at a chart is simple enough: "What is the market doing at the moment?". We need to forget about the predictions, look at the chart and try to see what he says about the behavior of the market directly at this moment. Looking at the history you need to evaluate what the market has already made to date. Is it in an upward or downward trend, or in a lateral movement? It is necessary to study the graphs, trying to find the key to the market movement. For example, is there a series of highs on the chart, each of which is higher than the previous one? Are there any previous highs on history that can serve as resistance? How strong is the trend? Were there significant retracements? And so on.

[caption id="attachment_331" align="aligncenter" width="696"] technical analysis[/caption]

Reading a schedule is skill. As in any other case, in order to learn to read graphics, you need time and practice, otherwise you will not be able to apply this skill correctly. When a trader has read what the market says, and not what he should say, then an opinion is formed about what is happening, and an appropriate decision is made whether to open a deal for purchase, for sale or for the time being to refrain from trading. From the opening of transactions should always be abstained, when there is no understanding of what the market is doing at the moment. Before taking any action, you need to wait until the market tells you what it does.

In order not to commit ill-considered actions and not waste money before entering the position, it is necessary to answer to yourself not three questions:

- When did the market signal?

- When did the market confirm this signal?

- What should happen to misunderstand me?

For example, if the stock retreated from the resistance level, it could serve as a signal. You can wait until the price comes back and the second time bounce off this level of resistance. This price behavior will confirm that the level is held and its penetration is unlikely. When confirmation appears, you can open the deal in short. The market will report that the decision is wrong if the price goes back up and pits the resistance level. When opening such a transaction, you can set a stop order above the resistance level, so that the loss was small and controlled.

Does the technical analysis work?

The answer depends on who uses it. Any tool will be useless if it is in the hands of someone who does not know how to use it. Jesse Livermore , the legendary investor who used his technical analysis skills in trading when reading the tape, said: "If you have a minute, I'll tell you how to make money on stocks." Buy at a minimum and sell at a maximum. "If you have 5 or 10 years, I will tell you how to understand when the stock is at a minimum, and when at the maximum. "

The truth is that trading is a difficult activity, but not in the sense that many people understand it. Recently I read an article on the Internet criticizing technical analysis. One of the arguments was that the largest institutionalists employ the most intelligent people in the world with academic degrees to trade using the best quantitative strategies. In the light of such a statement, it would be foolish to consider that a private investor can win in the fight against such intellectual power. Perhaps the first statement is true, but the second is not very. Starting trading, the trader slowly begins to understand that it is necessary to watch, fear and control not so-called geniuses of quantitative analysis, but a much more insidious opponent, and this opponent is the trader himself. The trader constantly has to fight with himself. He is a market, he is predictable, he succumbs to two enemies - fear and greed - at the most inopportune time. It is he - the reason that well-trained specialists of technical analysis can read on the chart the behavior of market participants. It is because of this predictable behavior, which is inherent in human nature, that certain patterns are formed on the graphs.

[caption id="attachment_332" align="aligncenter" width="536"] technical analysis[/caption]

Therefore, the greatest difficulty for each trader is his natural essence, and victory over it will be his greatest achievement. That's why the way to becoming a trader is through mastering oneself. which is inherent in human nature, certain patterns are formed on the graphs. Therefore, the greatest difficulty for each trader is his natural essence, and victory over it will be his greatest achievement. That's why the way to becoming a trader is through mastering oneself. which is inherent in human nature, certain patterns are formed on the graphs. Therefore, the greatest difficulty for each trader is his natural essence, and victory over it will be his greatest achievement. That's why the way to becoming a trader is through mastering oneself.

Happy ignorance

Many trading systems that promise quick wealth are based on certain technical principles. The only thing they can really do in just three days or a few weeks, or even a few months, is to give an understanding of some of the basics, such as graphic models. Possessing such knowledge, a trader becomes a more dangerous rival for himself and his portfolio than someone who does not know anything, because now he is armed with a false sense of competence. He thinks he has the knowledge, so he throws himself into the market with his head, but his money flows into the pockets of those players who really know what they are doing.

Therefore, the correct answer to the question "Does technical analysis work?" - it depends on who was asked the question. If the question is addressed to an experienced trader (professional or private) using technical analysis as a tool, the answer can be positive. And if the question is answered by someone who has just learned the word "trading", then it can be negative.

 

How to make money in Forex Market using Technical Analysis?

Want to make money in the forex market? You need to learn how to analyze the fundamentals of the market, understanding different currency news etc. Apart from that, you MUST learn technical analysis. Technical analysis is the science where you see the present chart and predict the future looking at different signal providers called technical indicators.

Technical Analysis

There are "fundamentals" and "technical" as materials to analyze the market price, both of which are important. Let's introduce the weight to this "Technical" this time.

You can understand even if you do not know international situation

Technical is simply an analysis method "predict the future price movements from past patterns". There are a lot of traders who place emphasis on this technical analysis in FX. You can read price movements without knowing the difficult international situation and you can become familiar with nature and FX transactions with the fun of this analysis itself.

The market is a living thing. Sometimes it is a whim, but there are obviously some "trends" with mysterious things. This is called "trend", and in the case of FX there is a characteristic that its trend lasts to some extent. If you know the trend, FX will be able to win with a considerable probability if you know what to do with the market price hike?

Full of investors 'experience'

It is a crystal of experience and wisdom of the investors in the battle, and this "technical index" is devised, so that you can see the movements of the market from all angles. There are a variety of things, such as those drawing various lines in line with "candlesticks" that is the basis of the basic, and those with figures drawn from completely different perspectives.

Until a long time ago, a number of these superior items that we could only use for professionals became usable by the evolution of the Internet and personal computers. It is no doubt that this is a major factor widely spreading FX to general individual investors.

Let's take a closer look at representative technical indicators and distinctive patterns.

A trend can be grasped from multiple viewpoints of moving average line short, medium and long.
Bollinger band "Power" of trend is known. You can assume the price range.
MACD
Stochastic
RSI
ADX
Doda Donchian
You can understand selling signs, buying signs, trend turning points.
Feel the "fever" of trading stocks and see through opportunities. etc.

What Next?

Now, understand the different technical indicators in detail. This website is full of the knowledge base to learn technical analysis. You can use this knowledge in Forex trading, stock market trading, commodity market trading etc.

Do NOT start with putting real money. Instead, start with the demo account. Many forex trading platforms like MetaTrader gives you notional money in the free demo account, wherein you can practise technical analysis with different technical indicators and learn the science and art of technical analysis.

You can discuss your questions and doubts in the comments section of this website and I'll try to answer them to guide you.