There are two major approaches to analyzing the currency markets, fundamental analysis and technical analysis. Fundamental analysis focuses on the underlying causes of price movements, such as the economic, social, and political forces that drive supply and demand. Technical analysis focuses on the studies of the price movements themselves. Technical analysts use historical data to forecast the direction of future prices.
The premise of technical analysis is that all current market information is already reflected in the price movement. By studying historical price movements, investors can make informed trading decisions. The following articles aim to give a thorough presentation of technical analysis tools and theories.
The primary tools of technical analysis are the charts. This ebook firstly introduces common types of charts available on charting softwares. Charts are used to identify trending and ranging markets. The ebook then continues to explain how to identify support and resistance levels, trend lines and price channels. Next, it presents simple trading strategies in trending and ranging markets.
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Contents
I: INTRODUCTION
II: WHAT ARE CHARTS?
- THREE MAJOR TYPES OF CHARTS
- 1. Bar Charts
- 2. Candlestick Charts
- 3. Line Charts
III: SUPPORT AND RESISTANCE
- WHAT ARE SUPPORT AND RESISTANCE?
- Support
- Resistance
IV: IDENTIFY THE MARKET TREND
- THREE PHASES OF MAJOR TRENDS
V: TRENDING AND RANGING MARKETS
IN TRENDING MARKETS
IN RANGE BOUND MARKETS
VI: TREND LINES
- WHAT ARE TREND LINES?
- THE BEST TREND LINE?
- USING HIGH/LOW OR CLOSE/OPEN
VII: TRADING THE TREND LINES
- 1. TRADING ON A PULLBACK
- 2. TRADING A BREAK OF THE TREND
VIII: PRICE CHANNELS
IX: CONCLUSIONS