Basics of technical analysis that will help you make money on the stock exchange
Technical analysis is the tool that is used to study the behavior of the price of an asset on the stock exchange.
Moreover, it doesn’t really matter what you are going to analyze - the stock market or forex, the trend movement occurs under the influence of the same factors.
Therefore, if you have studied technical analysis while working on one of the exchanges, you can successfully apply it in other markets.
The basics of technical analysis are designed to give the novice trader basic knowledge of how this process works and what tools are best to use to improve work efficiency.
It would also be a good idea to learn about the orderliness of the work and the correct formulation of conclusions based on the data obtained. So, what is the basis of technical analysis?
What are the fundamentals of technical analysis based on?
1. Setting your objectives .
You must clearly know what information you want to obtain during the analysis—this could be determining the trend direction or calculating the magnitude of a correction and its likelihood. The choice of execution tools (technical indicators) will depend on the objectives.
2. Selecting a time frame .
This is also part of the basic principles of technical analysis, as it's crucial to choose the right time frame to analyze and how relevant the information will be. For example, why would you need to know how the price performed over the course of a week if you're planning to trade on the M5 timeframe? In that case, studying the currency pair's chart on the M1, M5, and M15 timeframes, or at most, M30, is more appropriate. These are the timeframes on which you'll get all the information you need.
3. Technical Analysis Methods
It's important to consider how you analyze the existing trend, draw support or resistance lines, determine price levels, or identify chart patterns. For more information on this step, follow the link above. I personally prefer to use price channels or identify significant levels, but you might prefer another approach.
4. Conclusions .
After any analysis, conclusions should be drawn, and our case is no exception. However, to draw the right conclusions, you need to understand how to apply the data obtained. For example, if you've determined that the market is in an uptrend and the previous correction has only recently ended, you can open a buy trade.
When conducting your analysis, it's important to have the necessary knowledge base, as without it, it's quite difficult to both conduct the analysis itself and draw the necessary conclusions. You'll find this information on other pages of our website.
Technical analysis is a complex discipline, so if you want to make your life a little easier, use ready-made Forex strategies or at least technical analysis indicators; some of them even provide signals for opening trades.
Read other articles about technical analysis in the section - https://time-forex.com/tehanaliz
