Top 5 Essential Strategies in Technical Analysis
Technical analysis helps traders to make their decisions on how to act on the financial markets. Today, we present you with four primary and innovative strategies that advanced traders apply daily to perform technical analysis.
The trend lines assist the traders in determining the current direction in market prices. To create a trend line, the trader needs to have a minimum of two points on a price chart.
The resistance levels represent the price point that an asset had difficulties exceeding in the time considered. In other words, resistance levels are price levels where sellers exceed buyers.
There are three main chart types that traders commonly use: line charts, bar charts, and candlestick charts. Candlestick charts are often preferred because of their visual clarity, which makes them easy to observe.
Additionally, candlestick patterns can help traders see potential price action directionality in addition to finding specific entry and exit signals.
Anticipation vs Confirmation Approach
When planning a trade, most of the traders have two main approaches: anticipating the move or waiting for confirmation. Both methods have supporters. Anticipation can provide better entries with less certainty while waiting for confirmation provides higher assurance, but the entry will be later. There is no definitive answer on which one is better. Quite often, traders use both at different moments.
Apply Different Time Frames On Charts
When performing technical analysis, it is essential to focus on the bigger picture. One of the best ways to better look at the whole market is by analysing charts across multiple time frames. Apart from candlesticks, traders should pay attention to intraday charts, hourly charts, daily charts, etc. This helps to identify many price points.
Technical analysis is a skill that requires time to learn, so beginner traders shouldn’t feel lost if they can not understand its complexity. However, putting effort into studying and practising can help them stay profitable in the long term.