Home Introduction to Technical Analysis for Forex Speculation

Introduction to Technical Analysis for Forex Speculation

Technical analys cashback forex examines past price forex rebate club volume data to predict future price direction This type of analysis focuses on the composition of charts and formulas to capture major and minor trends and identify buy/sell opportunities by estimating the length of market cycles Depending on the time horizon you choose, you forexrebateclub use intra-day (every 5 minutes, every 15 minutes, every hour) technical analysis, or you can You can use weekly or monthly technical analysis Fundamental Theory The Dow Jones Theory, the oldest theory in technical analysis, holds cashbackforexexness prices fully reflect all available information and that the knowledge available to participants (traders, analysts, portfolio asset managers, market strategists and investors) has been discounted in the price action by currency fluctuations caused by unpredictable events, such as Gods Technical analysis is designed to study price behavior in order to draw conclusions about future direction The Dow Jones theory, developed primarily around stock market averages, suggests that prices can evolve into waves that include three types of magnitude - dominant, secondary, and subordinate correlation time periods ranging from less than 3 weeks to more than 1 year. This theory can also account for backwardation patterns, which cashbackforexbroker the normal stages that a trend goes through to slow down its movement, such as 33%, 50% and 66% Fibonacci backwardation phenomenon This is a widely used group of backwardation phenomena based on numerical ratios generated by natural and man-made phenomena. The most important levels of backwardation are 38.2%, 50% and 61.8% Elliotts waves Elliottists categorize price direction in terms of fixed wave-like patterns that indicate future indicators and reversals. Elliotts wave theory classifies push and correction waves into five and three main directions respectively. These eight directions make up a complete wave cycle that can span from 15 minutes to decades The challenging part of Elliotts wave theory is that one wave cycle can be composed of eight sub-periods, which can be further divided into push and correction waves. The Elliott School also uses Fibonacci inversions to predict the peaks and valleys of future wave cycles What are the components of technical analysis?  Spotting trendsThe first thing youll probably hear about technical analysis is the following axiom: Trends are your friendsFinding the dominant trend will help you gain an overview of the markets overall direction and give you sharper insight-especially when shorter-term market fluctuations disrupt the markets overall pictureWeekly and monthly chart analysis is best for identifying longer-term trends. Once the overall trend has been identified, you can select moves over the time span you wish to trade so that you can buy the dips on the upside and sell the upside on the downside Support and resistance Support and resistance levels are the points on a chart that are subject to sustained upward or downward pressure Support levels are usually the lowest of all chart patterns (hourly, weekly or yearly), while resistance levels are the highest of all chart patterns (hourly, weekly or yearly) Levels are the highest points (peaks) on a chart When these points show a recurring trend, they are identified as support and resistance The best time to buy/sell is near support/resistance levels that are not easily broken Once these levels are broken, they tend to become reverse barriers So, in an up market, a broken resistance level may become support for an up trend; however In a downtrend market, once a support level is broken, it becomes resistance Lines and channel trend lines are simple and practical tools in identifying the direction of the market trendUpward lines are made by connecting at least two successive lowsNaturally, the second point must be higher than the firstThe extension of the line helps determine the path the market will take to moveUpward trends are a specific method used to identify support lines/levels Conversely, a downward line is drawn by connecting two or more points to create a trading line whose volatility is to some extent related to the number of points connected. If you believe that trends are your friends credo in technical analysis, then moving averages will benefit you greatly Moving averages show the average price at a given time within a given period They are called moves because they are measured at the same time and reflect the latest averages One of the shortcomings of moving averages is that they lag the market. One of the shortcomings of moving averages is that they lag behind the market and therefore do not necessarily serve as an indication of a trend shift To address this issue, using a shorter period moving average of 5 or 10 days would be a better indicator of recent price movements than a moving average of 40 or 200 days Alternatively, moving averages can be used by combining two different time spans of averages Whether using a 5 and 20 day moving Whether using 5- and 20-day moving averages or 40- and 200-day moving averages, buy signals are usually detected when the shorter-term average crosses the longer-term average to the upside, while sell signals are signaled when the shorter-term average crosses the longer-term average to the downside  there are three mathematically different types of moving averages: simple arithmetic moving averages; line weighted moving averages; and squared factor weighted averages. averages of which the last is the preferred method because it gives more weight to the most recent data and considers the data over the entire period of the financial instrument 

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