Step one in technical research is to be taught the way to read the charts. Here are 1 or 2 basic lessons to point your early attempts. When first researching a currency pair, keep an eye open for the prevailing trend. Begin with the long run charts ( monthly, weekly, and daily ), going back for 1 or 2 years. Because these charts contain a larger quantity of information, they offer a more clear image of just what the currency pair is doing than the short term charts ( hour, half-hour, 15-minutes, or 5-minutes ). Identifying the trend is easy : just look at the chart and decide whether the graph is going more up than down, or maybe more down than up. Trends can be steep or shallow, years long or weeks short. Practice identifying them, and finding the points where they change direction. The longest-term trend is the most powerful, which is a different reason for taking a look at those charts first. Even if you’re scalping or day-trading and do not plan to hold a position longer than an hour, you’ll do better by trading in the same direction as the present trend. So trouble to spot it on perhaps the daily charts before starting. There’s an old trader’s announcing : The trend is your chum. It’s not a lie. When you have identified the trend in the long term charts, compare that with what you see in the near term charts. You’ll find that there may be any amount of intermediate-term and short term trends in the path set by the present trend. The graph will waver up and back down but generally it will follow the trail set by the longest-term trend.
Next, find the SR levels, which are the floor and ceiling points on the graph.
These are major points on the chart where the price frequently refuses to wreck through, or only peeks through then gives up the fight. The price will go just so high or so low, but no further, it reaches that point then changes direction.
The more times that happens, the stronger the SR are. Draw a straight line, either in your mind’s eye or on the chart, passing thru nearly all of the support points. Then draw another passing through just about all of the resistance points. This gives you a picture of the trail the currency pair’s trend is following, called a price channel, and it’s an easy but strong tool to help work out how that trail will continue.
When SR are dynamic, the graph of the currency pair appears to bounce along sideways between those 2 lines like a pinball.
These lines don’t need to be level. However it’s slanted, you can still trade inside that range. When a currency pair breaks out of a price channel, regularly it falls into the channel, and now and then it gains momentum and keeps moving. This last is called a momentum market, and it’s the other way to trade the range : set an entry order for the price to break out, either above or below the channel, then relax and let it ride. Congratulationsyou now understand the most urgent parts of basic technical research!
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