Learning 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. 1) All available information is already impounded in the market prices of the securities. 2) Prices always move in trends or patterns. 3) 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 and Candlesticks. Bar charts display price data in vertical lines which represents price action during a given time period. The tip at the top is the high for the period and 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 and the tic to the right of the line is the close.
Candlestick charts are similar to bar charts in that the top of the vertical line represent the high and the bottom of the vertical line represents the low. However, the market activity between the open and the close is represented differently by the use of candlestick bodies. A hollow body represents a higher closing above a lower opening. A shaded body represents a lower closing below a higher opening.
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.
You need to understand what are markets patterns? What are Uptrends? What are downtrends? And what are sideway trends? Markets expand and retrace constantly. It is the nature of the market to surge and then pause and retrace. Market prices may continue to expand for sometimes either upward or downward.
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. - 23210
Technical Analysis is based on the following assumptions. 1) All available information is already impounded in the market prices of the securities. 2) Prices always move in trends or patterns. 3) 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 and Candlesticks. Bar charts display price data in vertical lines which represents price action during a given time period. The tip at the top is the high for the period and 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 and the tic to the right of the line is the close.
Candlestick charts are similar to bar charts in that the top of the vertical line represent the high and the bottom of the vertical line represents the low. However, the market activity between the open and the close is represented differently by the use of candlestick bodies. A hollow body represents a higher closing above a lower opening. A shaded body represents a lower closing below a higher opening.
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.
You need to understand what are markets patterns? What are Uptrends? What are downtrends? And what are sideway trends? Markets expand and retrace constantly. It is the nature of the market to surge and then pause and retrace. Market prices may continue to expand for sometimes either upward or downward.
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. - 23210
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Trade Dow Futures. Learn Forex Trading.
posted by X - Men @ 1:58 AM
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