Technical Analysis Plan
Conducting technical analysis requires a specifically designed action plan to ensure
consistency and improve the process's effectiveness. A well-designed plan is the foundation of preparation for trading.
Methodological literature primarily describes the methods and techniques of various types of market analysis, but neglects to address how to apply this knowledge in practice.
A Forex technical analysis plan depends on the specific market analysis method you choose for your trading strategy, but there are still common components to any plan.
If your strategy involves long-term trades, you'll need to study a longer timeframe of several days or even weeks.
2. Objectives – determine what you need to determine during the analysis, whether it's simply determining the trend direction or obtaining comprehensive information characterizing the Forex market situation. Avoid setting an overly broad range of objectives, as this will significantly increase the analysis time and the resulting data may simply become irrelevant.
3. Tools and Instruments – Once you've determined what you need to determine, we move on to preparing the practical part. We plot the necessary levels or lines, install technical analysis indicators , or perform other actions.
To speed up the process, it is recommended to use specialized indicators whenever possible; this significantly reduces the analysis time and improves its accuracy.
4. Evaluation of the obtained information is essentially the final stage, during which you evaluate all the data and draw conclusions about the current market state. After this, you can move on to forecasting and opening new trades.
Example of a technical analysis plan.
A better understanding of the above can only be achieved with a specific example. In our case, we will attempt to analyze a trend for trading using a channel strategy.
1. Trading will be conducted on the M30 half-hour time frame, meaning we will analyze a half-hour time interval. For additional information, it would also be useful to study the H1 and H4 periods.
2. Our task is to find a more favorable market entry point and plot support and resistance lines.
3. We plot the lines using a special channel indicator; it automatically draws the necessary lines depending on the time frame being analyzed.
4. Using the resulting lines, we determine the magnitude of price fluctuations and trend direction, as well as the most favorable entry time.
The analysis follows a general principle: the shorter your trading timeframe, the less time the analysis should take.
