Technical analysis for beginners is easy
Two types of analysis—technical and fundamental—are used to determine the direction of trades in the forex or stock markets.
While news trading seems straightforward at first glance, technical analysis always presents challenges.
These difficulties stem from the fact that novice traders are immediately confronted with the most complex methods of technical analysis,
which require extensive study and aren't always effective in practice.
Technical analysis for beginner traders utilizes simple techniques that allow one to quickly assess the current market situation.
Technical Analysis Techniques for Beginner Traders
The main task when studying the market is to determine the current price position and predict its direction.
Several simple axioms help with this:
Minimums and maximums – by analyzing the chart of any currency pair, you can quite easily determine the minimum and maximum price values:
Based on these data, we can determine how close the price is to a given point. The closer the current price is to a local minimum, the higher the chances of a reversal and price rise.
Conversely, if the price is approaching a maximum, this may indicate a high probability of a decline.
It should be noted that the minimums and maximums serve only as guidelines, as the price may form new extremes depending on the trend. For greater clarity, it's best to use a price channel.
Price channels are corridors within which the price moves for a certain period of time. They are constructed based on several minimum and maximum points:
This construction allows you to track movement dynamics and, based on them, determine favorable market entry points.
The most common strategies are breakout and channel-based.
A channel-based breakout strategy assumes that if the price breaks through the boundary and moves more than 100 points, its movement will continue. It is described in more detail here - http://time-forex.com/strategy/strategiya-proboj
Meanwhile, a channel-based trading strategy assumes that the price will continue to move within its boundaries, making reversals.
Furthermore, a price channel serves as an excellent technical analysis tool, allowing you to determine trend direction and current market volatility.
Correction is also a fairly simple technique that can be incorporated into technical analysis for beginners:
It's quite difficult to determine how long a given trend will last, but it's certain that a correction will follow.
To begin trading, you should wait for a strong and sharp price movement, no matter in which direction, then wait a while and open a trade when the correction begins.
It is important that the main movement is at least several thousand points at a five-digit rate.
Simple techniques of technical analysis also include:
- Gap strategy - http://time-forex.com/strategy/strategiya-gep
- Strategy using the Stochastic indicator - http://time-forex.com/strategy/strategiy-stohastik
And some other trading options that don't require extensive training.
Technical analysis for beginner traders allows for maximum efficiency within the first few months of trading. Its core principle is ease of understanding and application.
