Understand Technical Analysis Terminology
As a currency trader, you need to understand the various terms that are frequently used in Technical Analysis. By definition, Technical Analysis is the study of historical and ongoing price data through charts, price patterns and chart indicators. Charts display price action in time intervals using bars and candlesticks.
Technical Analysis is based on the following assumptions. The most important is that all available information is already impounded in the market prices of the currencies. The second assumption says that prices always move in trends or patterns. The third assumption says that history repeats itself meaning you can predict the future market by studying the past market prices.
We follow trends because experience has shown that once a trend is in motion, it is most likely to continue rather than reverse it. The more one studies chart patterns, the clearer it becomes that reading and interpreting chart patterns are more an art form than a skill.
Charts come in two types. Bar charts and Candlesticks charts. Bar charts display price data in vertical lines. These vertical lines represents price action during a given time period. The tip at the top is the high for the period. The tip at the bottom is the low for the period. The open and close are represented by small horizontal dashes called tics. The tic to the left of the line is the open. The tic to the right of the line is the close.
Candlestick charts are similar to bar charts in many ways but different in other ways. Candlestick charts were developed by Japanese rice traders. They are used extensively in technical analysis. Like the bar charts, the top of the vertical line represent the high. The bottom of the vertical line represents the low. However, the price action between the open and the close is represented differently by the use of candlestick bodies. A shaded body represents a lower closing price below a higher opening price. A hollow body represents a higher closing price above a lower opening price.
The price activity above and below the body is referred to as wicks or tails. A trader may use a 3, 5, 10, 15, 30, 60 and 180 minutes charts. For swing and position trading, a trader may use a daily, weekly or a monthly chart. These charts all use the Greenwich Mean Time (GMT) or the Eastern Standard Time (EST) depending on the software that you use. But you can always adjust them according to your local time.
While doing technical analysis, you need to understand markets patterns? You need to understand what are Uptrends? You should also know what downtrends are and what are sideway trends? Forex markets expand and retrace constantly. Currency prices may continue to expand for sometimes either upward or downward. It is the nature of the currency markets to surge then pause and retrace.
Trends in markets make a series of peaks and troughs as they move. An uptrend consists of a series of ascending peaks and troughs, each peak higher than the last peak and each trough lower than the last trough. A downtrend consists of a series of descending peaks and troughs. A sidways trend consists of a series of horizontal peaks and troughs meaning all peaks and all troughs are almost on the same level. - 23159
Technical Analysis is based on the following assumptions. The most important is that all available information is already impounded in the market prices of the currencies. The second assumption says that prices always move in trends or patterns. The third assumption says that history repeats itself meaning you can predict the future market by studying the past market prices.
We follow trends because experience has shown that once a trend is in motion, it is most likely to continue rather than reverse it. The more one studies chart patterns, the clearer it becomes that reading and interpreting chart patterns are more an art form than a skill.
Charts come in two types. Bar charts and Candlesticks charts. Bar charts display price data in vertical lines. These vertical lines represents price action during a given time period. The tip at the top is the high for the period. The tip at the bottom is the low for the period. The open and close are represented by small horizontal dashes called tics. The tic to the left of the line is the open. The tic to the right of the line is the close.
Candlestick charts are similar to bar charts in many ways but different in other ways. Candlestick charts were developed by Japanese rice traders. They are used extensively in technical analysis. Like the bar charts, the top of the vertical line represent the high. The bottom of the vertical line represents the low. However, the price action between the open and the close is represented differently by the use of candlestick bodies. A shaded body represents a lower closing price below a higher opening price. A hollow body represents a higher closing price above a lower opening price.
The price activity above and below the body is referred to as wicks or tails. A trader may use a 3, 5, 10, 15, 30, 60 and 180 minutes charts. For swing and position trading, a trader may use a daily, weekly or a monthly chart. These charts all use the Greenwich Mean Time (GMT) or the Eastern Standard Time (EST) depending on the software that you use. But you can always adjust them according to your local time.
While doing technical analysis, you need to understand markets patterns? You need to understand what are Uptrends? You should also know what downtrends are and what are sideway trends? Forex markets expand and retrace constantly. Currency prices may continue to expand for sometimes either upward or downward. It is the nature of the currency markets to surge then pause and retrace.
Trends in markets make a series of peaks and troughs as they move. An uptrend consists of a series of ascending peaks and troughs, each peak higher than the last peak and each trough lower than the last trough. A downtrend consists of a series of descending peaks and troughs. A sidways trend consists of a series of horizontal peaks and troughs meaning all peaks and all troughs are almost on the same level. - 23159
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Develop your own Forex Trading System. Read about L.M.T Forex Formula.
posted by X - Men @ 4:55 AM
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