{"id":1129,"date":"2019-08-20T10:47:36","date_gmt":"2019-08-20T07:47:36","guid":{"rendered":"http:\/\/roboforex.com/blog\/?p=1129"},"modified":"2023-06-23T09:59:37","modified_gmt":"2023-06-23T06:59:37","slug":"basics-of-technical-analysis","status":"publish","type":"post","link":"https:\/\/roboforex.com/blog\/blog\/2019\/08\/20\/basics-of-technical-analysis\/","title":{"rendered":"Basics of Technical Analysis for Successful Forex Trading"},"content":{"rendered":"\n

To succeed in market trading you should learn how to analyze and build forecasts for the price movements. The market price is influenced by a whole range of various factors, all of which we literally cannot know. A question emerges: in this case, how does forecasting become possible? This question is answered by one of the basic and most necessary types of market analysis — technical analysis.<\/p>\n\n\n\n

<\/span>What is technical analysis?<\/a><\/span><\/h2>\n\n\n\n

Technical analysis<\/strong> is a method of forecasting price changes by analyzing price charts of the previous timeframe<\/a>. A tech analysis is about analysis of price charts. In order<\/a> to continue the story about the basics of technical analysis, you must first get acquainted with the main chart types.<\/a><\/p>\n\n\n\n

<\/span>Main chart types<\/span><\/h2>\n\n\n\n

All changes of the price are reflected on charts, which are of several types:<\/p>\n\n\n\n

<\/span>Tick chart<\/span><\/h3>\n\n\n\n

Tick chart<\/strong> reflects every change of the market price on the chart and is not bound to timeframes. As long as there are plenty of trades on the market, there take place plenty of price changes just in a minute. The chart is too chaotic for analyzing, often used by scalpers for day trading<\/a>.<\/p>\n\n\n\n

\"Tick<\/a>
Tick chart<\/figcaption><\/figure>\n\n\n\n

<\/span>Line chart<\/span><\/h3>\n\n\n\n

Line chart<\/strong> is the simplest of charts, most often drawn on closing prices of each timeframe<\/a>. Looks like a solid angledline. Practically reflects the result of the competition between bulls<\/a> and bears<\/a> on each timeframe. Shows the general direction of price movements.<\/p>\n\n\n\n

\"Line<\/a>
Line chart<\/figcaption><\/figure>\n\n\n\n

<\/span>Bar chart<\/span><\/h3>\n\n\n\n

Bar chart<\/strong> reflects the price changes in a compact way, each period looking as a bar showing the opening and closing price, the maximum and minimum. This information is enough to work with such chart.<\/p>\n\n\n\n

\"Bar<\/a>
Bar chart<\/figcaption><\/figure>\n\n\n\n

<\/span>Candlestick chart<\/span><\/h3>\n\n\n\n

Candlestick chart is also called Japanese candlestick chart. It is drawn similarly to the bar chart, but the closing result is called the \"body\" of the candlestick. This chart is more demonstrative as the bodies are colored.<\/p>\n\n\n\n

\"Candlestick<\/a>
Candlestick chart<\/figcaption><\/figure>\n\n\n\n

<\/span>Postulates of technical analysis<\/a><\/span><\/h2>\n\n\n\n

<\/span>Price reflects everything<\/span><\/h3>\n\n\n\n

The idea is that any factor that can influence the price is taken into account by the market and immediately included into the price, which is reflected on the chart. In other words, the price chart at any moment of time reflects and reacts upon all the factors influencing it — economical and political rumours, expectations, etc.<\/p>\n\n\n\n

<\/span>Price movements are subject to trends<\/span><\/h3>\n\n\n\n

This means that on the market there are timeframes when the price is moving predominantly in one direction (is rising or falling). In other words, a trend is a one-way price movement<\/a>. The reasons for a trend to appear may be economical, political and other factors. It is thought that the existing trend is more likely to continue than to change and will remain in force until it weakens and shows explicit signs of the upcoming change.<\/p>\n\n\n\n

Depending on the length, trends might be divided into 3 types:<\/p>\n\n\n\n