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THE BASICS OF TECHNICAL ANALYSIS
The Basis of Technical Analysis explains trend analysis and how to use basic trend following techniques.
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What is Market Trend?
Trend is simply, the overall direction prices are moving, UP, DOWN, OR FLAT.
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Types of Trends
The direction of trend is absolutely essential to trading and analyzing the market.
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Trend Classifications
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Drawing Trendlines
The basic trendline is one of the simplest technical tools employed by the trader, and is also one of the most valuable in any type of technical trading.
For an up trendline to be drawn, there must be at least two low points in the graph where the 2nd low point is higher than the first.
A price low is the lowest price reached during a counter trend move.
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Information about Trendlines
Markets don't move straight up and down. The direction of any market at any time is either Bullish (Up), Bearish (Down), or Neutral (Sideways). Within those trends, markets have countertrend (backing & filling) movements. In a general sense "Markets move in waves", and in order to make money a trader must catch the wave at the right time.
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Channel Lines
When prices trend between two parallel trendlines they form a Channel.
When prices hit the bottom trendline this may be used as a buying area and when prices hit the upper trendline this may be used as a selling.
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Find Price Support Levels
Price supports are price areas where traders find that it is difficult for market prices to penetrate lower. Buying interest in the dollar is strong enough to overcome Selling interest in the dollar keeping prices at a sustained level.
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Finding Price Resistance Levels
Resistance is the opposite of support and represents a price level where Selling Interest overcomes Buying interest and advancing prices are turning back.
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50% Retracements
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33% and 66% Retracements
There are also 33% and 66% Retracements.
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