technical analysis

Key Components of Technical Analysis

Key Components of Technical Analysis

Welcome to Part 2 of our series, Technical Analysis. The Key to Success in the Competitive World of Trading.

In this entry, we’ll delve deeper into some of the fundamental tools of the trade – thinking of chart patterns like old friends you come to rely on, support and resistance levels as trusted sentinels standing guard, and moving averages as loyal companions always by your side, smoothing out the ups and downs to help you navigate the market’s twists and turns with greater clarity and insight.

Whether you’re a grizzled vet or just starting out, we aim to give these concepts more flesh and blood so you can see how harnessing their human-like qualities can elevate your own skills in the pressures of this dynamic business of finding opportunity where others see only risk.

Buckle up as we explore what really makes these tried and true techniques tick!

(for part 1 visit this page)

The Importance of Understanding Technical Analysis

These concepts are essential for the old salts lookin’ to keep their performance from getting rusty and increase their chances of coming out ahead in this game.

By the time this here series is done, you’ll have the know-how and tricks of the trade like seasoned gear in your toolkit to really ply your waters at a higher level. Ain’t nothing better than learning from your peers who done this longer than you’ve been in short pants.

So pull up a chair, pour yourself some coffee and let these wizened traders pass on what they’ve learned the hard way over decades of riding the market’s waves. The smart money’s on you absorbing every nugget they’re willing to impart before shoving off againsolo.

This sure-handed knowledge is what separates the contenders from the pretenders when the going gets rough.

#1. Chart Patterns

These pattern formations are like old friends you come to recognize over the years. Some, like Head and Shoulders, usually cause a ruckus but then settle down again for a spell. Triangles can go either way, keeping you on your toes as the pressure builds inside ’em. Then there’s my pal Double Bottom – had a few drinks with him after the first bump, only to get foolish and trip again before finding my footing.

But these recurring characters all tell a story, don’t they? Areas where the market gets itself in a lather before needing to blow off some steam, sometimes switching directions after its little tantrum.

So we have things like:

  • Flags occur when a price moves in one direction and then pauses to form a channel. 
  • Pennants are formed when two trendlines converge to form a triangle. 
  • Triangles are formed when two trendlines converge to form a symmetrical triangle. 
  • Rectangles are formed when two trendlines form a rectangular box. 
  • Cup and handle formations are formed when a price forms a “cup” and then a “handle”. By recognizing chart patterns, traders can identify potential trading opportunities and maximize their profits.

It’s our job to watch for when them patterns start to take shape so we know whether it’s gonna be smooth sailing after or if we’re in for a bumpy ride. With experience, you start to get a feel for just what those loitering prices might have in store next.

#2. Support and Resistance Levels

I like to think of support and resistance as like these invisible forces in the market – lookout points we’ve identified over time where it’s really make-or-break on which side comes out on top.

👉 Support levels, man, those are like your ride-or-dies who always got your back when you start to stumble. When the bears come knocking you know your support crew will be right there to lift you back up.

👉 Resistance, on the other hand, can be a real buzzkill. Those levels are like the tough-talking traders who put their foot down and don’t let the bulls have their way without a fight. You gotta respect their grit, though – without them keeping everybody honest we’d just go skyward without a care.

The trick is knowing just when your true-blue supports might falter or when a resistance guard might finally tire out and give way. That’s when the magic happens and trends really kick into gear.

By identifying these levels, traders can minimize their risk and maximize their profits.

Mastering the Art of Identifying Support and Resistance Levels: Techniques for Beginner Traders

Spotting them support and resistance regions is like nothing you learned in school, right?

Takes a keen eye and hands-on experience to tell where them invisible battle lines are forming in real-time. But don’t you worry – we’ve all been newbs before!

For now just focus on watching, watching, watching. See where them price slides kept meeting resistance before stalling, or bouncing off support like a basketball.

Drawl those spots right on your charts too, it’ll start to sink in better visually. Some other mates might have insight too, so don’t be shy asking them where they scouted levels forming. And trust me – give it a month or two and you’ll start to spot the tell-tale signs yourself without thinking.

It’s like your brain just learns to see the patterns. So have some patience grasshoppers. Keep your glasses charged and you’ll get the hang of it before you know. Then when you start kicking off them support-resistance reads, the beers are all on you!

Why we get so het up about finding them there support and resistance zones.

It’s real simple – them levels tell us where the market’s most likely to turn, see. When price hits resistance, that there’s a sign that more folk want to sell than buy just then. And vice versa down at support. So if we can identify where folk usually start changin’ their tune, it gives us an idea of where the tide may turn next.

Now you’re probably thinkin’, so what? Well I’ll tell ya – knowin’ likely spots for reversals is gold in this industry. It means we can place our trades ahead of the crowd, hopin’ to ride the wave in the right direction. Get in before the masses and get out before they do too, and that’s where you’ll start stacking up the wins.

There is more!

Beyond that, support and resistance levels give us information about overall trends too.

See, when support or resistance get breached, it shows us the big boys have picked a side and momentum’s shifted. So we know to look for extended moves rather than it just bobbin’ around short-term.

In the end, findin’ support or resistance zones is like gettin’ a glimps’ into other traders’ minds. And havin’ that edge, even just a little one, it’s what’ll make the difference between being a weekend warrior and a pro. Marks my words, lads – you shore up your support and resistance skills and your future trades will thank ya!

Identifying Support and Resistance Levels

Alright boys, now it’s time I shared some proven methods for sniffin’ out them there support and resistance levels ourselves. Always good to have a few tools in your toolbox, right?

Here’s three techniques even you greenhorns can start practicing today:

Technique Nº 1

First up is good ol’ fashioned price action. This here’s probably the most reliable method. You’re just spotting where the market kept bunting up against resistance before sliding off, or bouncing at the same support window multiple times.

Keep an eye out for three or more touches – that’s when you know you’s found a strong zone.

Technique Nº 2

Second is them trusty moving averages. 50-day, 100-day, 200-day – any of the mainstream MAs can highlight spots where momentum often shifts. Pay attention to when price crosses over or under the line, and note if she reverses right after.

Chances are you got yourself the makings of a level there.

Technique Nº 3

Last one is breakout and retest analysis. If we sees a buffer get smashed through with authority, odds are she’ll loop back and re-sample that territory as support or resistance going forward.

Make a note of former ceilings turnt floors, or floors turnt ceilings.

A note to end on:

Now don’t try wrestlin’ with all three methods at once – walk before you can run. But focus first on good ol’ touch analysis. The more you practice, the sharper your eye’ll get at recognizin’ them levels emerging.

And before you know it, you boys will be spotting zones like seasoned prospectors!

Keep at it and those wins might follow.

#3. Moving Averages

moving averages location technique.

Alright lads, for our third technique ol’ Adam here was talkin’ about them moving averages. Now MA lines are a bit different than just eyeballing straight price action or breakouts like we discussed earlier.

👉 With moving averages, we let the math dogs do some of the work for us! You see, an MA like the 50-period will calculate the average price of the last 50 candlesticks. Then it draws a line connectin’ each average to smooth out them daily ups and downs.

Navigating the Market: A Beginner’s Guide to Identifying Trends

Now here’s where it gets fun – when the market price crosses above or below one o’ them lines, it can be a leading indicator that momentum is potentially switchin’ gears. Because it takes, say, 50 periods for an average to really change course – so by the time it crosses, the tide may already be turning under the surface.

You’ll also notice average lines have a tendency to act like invisible magnets, drawing the market back towards them when we get overextended short-term. So watch for price bouncing between the SMAS like a screen door in the wind – could be hinting at overall rangebound action or an impending breakout.

Anyway, not too much more explainin’ needed on my end boys. The main takeaway with MAs is letting them pretty lines do the math work while you look for signs of that laggin’ indicator catchin’ up to what’s already happened. Over time you’ll get a real feel for “the message in them movements.” Keep those beady eyes glued and you’ll pick it up in no time!

Mastering the Basics: How to Identify Trends Using Price Charts

Alright lads, I know we’ve covered a lot already but there’s one more basic we gotta hit – identifying them market trends from price charts.

Now this here’s true fundamentals that, once you’ve got it, you’ve got it. It’ll serve you well your whole danged trading carrier.

First thing – take a gander at them price movements over time.

Is it bounce-bounce-bouncing higher overall? Then you got yourself an uptrend.

Bouncing lower each time round? Downtrend, mates. Real simple stuff.

Now within them larger trends, you’ll often see little mini-trends taking shape. That’s where our buddy the swing come in mighty handy. Connect them highs or lows with your line tool and watch how it moves relative to it, like a sailboat tacking ‘gainst the wind. Is it hitting new highs or lows each gybe? Then you know the micro-swing is still aligned with the macro-trend.

Last pointer – don’t just marry yourself to one timeframe. Flip through the charts and squint from different angles, if you catch my meaning. A daily chart trend might look entirely different than what the weeklies are singing.

Give it all a gander to paint the full picture.

Anyway, hope this helps decode them squiggly lines a smidge, mates! Remember, practice makes perfect -soon identifying trends will come as second nature, I promise. And that right there is half the battle in this industry. Keep it up and you’ll get the hang in no time.

Conclusion

Alright you scallywags, we’ve sure covered a lot of ground in this here article! I hope all them techniques and tricks for analyzing support/resistance levels, spotting patterns, reading trends and using moving averages gave yer poor greenhorn brains a good exercise.

Trading may look all glam from the outside but it sure takes dedication to mastering these basics under the hood.

But don’t you fret none – every journey starts with that first step, as they say. And I gotta tell ya, I’m proud as punches with all the curious minds reading this, willing to get yer hands dirty learning this here industry. Just remember – it ain’t a sprint, it’s a marathon.

So keep them notebooks handy, keep them eyes peeled, and most of all keep ya head on a swivel out there in them markets!

With time and experience, all these concepts will click together louder’n whiskey and bingo on a Saturday. But for now just focus on absorbin’ it one step at a time. And hey, if’n anything’s still fuzzy, you know where to find ol’ Adam for more colorful explanations over a cold one! You’ve got the right crew behind ya now and that’s half the battle in this wild world of trading. Keep learning, keep sharing – and I just know success will follow in good time.

Now who’s ready for another round?!

You’ve earned it after such a fine guideline. Cheers, you salty dogs!

Fundamental vs Technical Analysis — Do I Have to Choose? 

Part 3

Alright fellas, sounds like this here Part 3 is where we really start puttin’ them ole ticker-watchin’ skills to the test, eh? I know some of you greenhorns have been chompin’ at the bit to put them techniques we been learnin’ through their paces in a real portfolio. Well buckle up, because this is where the rubber truly meets the road.

We’ll start by refresher how’s and whys we watch for trends – them bulls and bears that’ll make us or break us. And how to spot them shiftin’ gears early before the others. Then it’s onto dissecting them marketplace moves with a finer tooth comb, extractin’ all them tidbits ’bout what she might do next. Finally, we’ll gab about craftin’ yer own game plans to leverage them analysis superpowers – mappin’ out entries, exits, risk tolerance, and winnin’ goals.

But the real treasure here’s we ain’t just blatherin’ theory. Ol’ reliable Adam here is gonna walk y’all through legit trades he’s made use them very techniques. Show you how it really looks in the sharpenin’ room, with real pot o’ gold on the line. None of them country club hypotheticals! So you can see first hand how it pays to put diligent planning and that tech know-how together as one.

👉 By the end, those portfolios of yourn will be primed like never before. So you can shove off confident as can be, leavin’ them panic sellers and blind traders in yer wake. Cause in the markets like in life boys, preparation is key. Now who’s ready to take them book smarts to the streets and prove your worth?! I sure as shootin’ am!

Adam Harris

FXGlobe Ambassador Adam Harris is based in London, UK. He’s been trading professionally since 2013 and his specialties are technical and trend-based trading.

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