Category: Technical Analysis - Page 11

The Candlestick Price Charts

Candlestick Charts – Offering Best Information about Forex Trading!

All traders in all financial markets continuously seek for proper tools to analyze the behaviour of the price of the financial assets in order to determine its direction and the right moment to open a position. Well, there are numbers of solution available through which people can get the right option for their market trading. One of the best solutions is the candlestick chart which is a special type of bar-chart through which investors can get more information about the price behaviour of any financial instrument like stocks, currency pairs or derivative for example.

Technical Analysis in Trading

by rcanessa

Introduction

There are two main approaches used to analyze and decide when to buy or sell in the market. These methodologies are called technical analysis and fundamental analysis and each one is based on radically different principles. In this section, we are going to discuss mainly about technical analysis but at the same time, we are going to present an introduction to fundamental analysis to explain this approach to visitors.

Fundamental analysis

In the Forex market, the fundamental analysis examines in depth the political, social, or economic events and how and why these events have historically affected the prices of currencies. So its main purpose is to understand the current state and likely evolution of the price action according to the socioeconomic circumstances that are currently being developed or in the process to be developed.

In the case of stock market analysis, for example, the fundamental analysis examines the financial reports published by the company, audits, quarterly and annual balance sheets, market trends, product quality, dividends, sales, position against competitors, news, etc… Ultimately this determines whether the stock price is below, above, or matches the price at which such share is quoted at the time. If, for example, the result of the fundamental analysis shows that the share price should be higher than what is listed at that time, the recommendation is to buy it and wait for the market’s true value.

In the case of the Forex market, fundamental analysis studies the economic, political, social, and even weather events that can affect the exchange rates of the currencies mainly in the long term.

The Stochastic Oscillator Indicator

by rcanessa

What is the stochastic oscillator? The Stochastic Oscillator is a popular technical indicator used in financial market analysis, particularly in trading. It is a momentum oscillator that compares the current price of an asset to its price range over a certain period of time, typically 14 days. The Stochastic Oscillator was developed by George Lane, a prominent technical analyst, in … Read more

Pivot Points in Trading

by rcanessa

Pivot points are a popular technical analysis indicator used in trading to identify potential support and resistance levels for an asset’s price. These levels are calculated based on the asset’s high, low, and closing prices from the previous trading session. They are used to determine levels at which the price is likely to bounce or continue the current trend. In this article, we are going to show the different types of pivot points that exist, their calculation, and some suggestions for their use.

Pivot Points in trading — Standard Pivot Points

Traders use pivot points to help determine potential entry and exit points for trades. For example, if the price of an asset is approaching a pivot point level that is also a resistance level, traders may consider selling the asset as the price is likely to encounter selling pressure at that level. Conversely, if the price is approaching a pivot point level that is also a support level, traders may consider buying the asset as the price is likely to find support at that level.

Pivot points are most commonly used in intraday trading, but they can also be used for longer-term trades as well. There are several different methods for calculating pivot points, including the standard method, the Woodie’s method, and the Camarilla method, among others.

Trading models based on channels: Wolfe Waves

by rcanessa

Price channels are a clear example of resources that can be used to define both entry points and exit points. In addition they allow to analyze the current situation in the market in such a way that they allow the trader to make better decisions. Once the channel is formed, we can obtain a lot of information related to the price movement inside the same channel, however the problem occurs when the market does not move in a defined channel, a situation in which it can be difficult to detect breakout points and therefore the reaction of the market can take us by surprise.

For these cases the investor can use the so-called “advanced channel models“, among which we can highlight the Wolfe Waves, which can help us to identify potential entry and exit points of the market based on channels, even when in appearance there is no clearly defined channel.

The Camarilla Equation – Formula and Definition

by rcanessa

The Camarilla Equation is an interesting market analysis tool similar to the pivot points but is little known among the majority of traders. For this reason, in the following article, we will explain in detail about the fundamentals and use of this tool.

Camarilla equation was discovered by the trader Nick Stott in 1999, and until recently it was a secret formula to determine price levels similar to the pivot points, but according to many traders, these levels are more effective. It assumes that the market has the tendency to revert to a point of balance that might be called midpoint, pivot, and so on. Based on this idea and using the formula of the equation is possible to calculate 8 relevant price levels in which is likely to produce changes in the market trend.

As mentioned at the beginning of the preceding paragraph, the Camarilla equation was secret until it was somehow released. The equations for calculating the 8 levels are:

Stages that characterize a bullish or bearish market

by rcanessa

The phases that characterize the bull and bear markets are as follows:

– Bull Market

This type of market is produced when the advance of prices reaches a level higher than the previous advance. Likewise, when no secondary trends become established below the latest peak. We can identify three phases in a bull market:

Accumulation phase: At this stage falls occur in the market as the investors sell because the economic news are mostly negative. There is a moderate activity that begins timidly to recover.
Recovery or expansion phase: In this case the activity begins with a modest progress and it produce a shy rising in market prices.
Distribution phase: There is great activity in the market. There are major upward movements in market prices and trading volume and investors take long positions without objection.

Stochastic RSI Indicator

by rcanessa

The Stochastic RSI was developed to increase the sensitivity and reliability of the regular RSI indicator especially when the trader wants to trade during periods when the RSI is in overbought/oversold condition.

The creators of this indicator – Tushar Chande and Stanley Kroll – explain that very often the RSI oscillator remains at the levels 20 and 80 for extended periods of time without even reaching the overbought and oversold areas where many traders look for opportunities to enter the market.

Therefore, when the RSI is combined with the stochastic oscillator, a new indicator, the Stochastic RSI, offers better and clearer signals for opening and closing positions.

Elliot Waves Theory – Description and Features

by rcanessa

Elliot Waves Theory – Offering Great Predictions!

The Elliott Wave theory developed by Ralph Nelson Elliott (1871-1948), is based on the principle that price movements of financial markets can be described through the waves that form it and the study of the graphic formation of these waves. It is based on Dow theory and is a significant advance on this. In other words, it analyzes the different movements or «waves» in any period of time, both the bullish and the bearish waves.

After the death of Elliott, this theory was almost forgotten and years later was AJ Frost and Robert Prechter who with his book Principles of Elliott Waves (1978) made it popular.

+ More