Whether you are trading stocks or currency, technical analysis is an advanced tool used to try and predict changes in your market and trade accordingly.
At the base of technical analysis is price history. You are studying the price of a currency, it’s up and downs, and looking for an obvious indicator that will tell you when another up or down is coming up. Think of it like trying to learn to read tea leaves to see the future – except there is real science behind it.
Using Charts For Technical Analysis
The most basic tool for technical analysis is your chart or graph. Whether you are looking at a line graph or candlesticks, the Forex trading chart is giving you a wealth of information. First, you can check the support and resistance. These are the points where it seems that the currency pair won’t cross. Is there a certain range in which the currency is moving? When you see a price making sudden movements in that range you can use the support and resistance to predict when it is going to change its direction again.
Trend lines can be used when there is a definitive pattern that you can follow. You can chart the trend line if it is moving in one direction to predict where the price is going to go using indicators.
For example, let’s say you are studying a candlestick chart -which you should as they give you more indicators in one convenient place. This type of chart can help you to find trends that indicate a major reversal is about to take place. One indicator you can look for is what traders refer to as “three white soldiers” which indicate a bullish reversal is pending. Continue reading "Understanding the Basics of Technical Analysis"→
The Energy Report: Energy prices are very sensitive to international events, especially conflicts in the Middle East. Do your charts factor in the periodic crises that impact oil and gas prices as buy and sell moments? How do you factor in inflation and interest rate movements into your calculations about which energy juniors look like good buys at any given time?
Clive Maund: The charts do factor in periodic crises that impact oil and gas prices as buy and sell moments, but often in a contrary way. The trick is to gauge when a crisis is at its moment of greatest tension, and while this is not at all easy, the charts can often be a great help in defining such a moment. I will give you an example using a recent call on CliveMaund.com, where the top in oil was pinpointed a day after its occurrence. Some readers may remember an old saying used on the London market many years ago, "Buy on a strike." This refers to a strike by labor, not an oil strike. The underlying psychology of this was that the time of maximum tension and uncertainty, which was when labor unions called the workers out on strike, was the best time to buy stocks, because they would have been falling in anticipation of this, and as tensions later eased as the situation headed to resolution, they would rise again. So it is with conflict and tension situations in the Middle East and their impact on the oil markets. Continue reading "Technical Analysis Toolkit for Energy Investors"→