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آ The historical data serves as a strong base for such analysis. The oldest technical analysis tool, known as “candlestickâ€, is believed to hail from Japan since the 18th Century. Then came the very popular “Dow Theory†in the 19th century, laid down by the very famous Dow Jones. Any technical analysis would be based upon three assumptions viz.,
A good technical analysis is based on different trend patterns designed by the technical analysts. A best technical analyst would always advice to go along with the current trend, that is a trader should “Go Long or Hold†in an upside trend and “Go Short or Sell†in a downside trend. Technical analysis is all about charting out different patterns so as to enable the trader to decide on the best pattern and follow the same in his trading decision. The popular technical analysis tools are charts, trend patterns and technical indicators. Technical analysts use the historical trends and market analysis to correlate it with the current factors affecting the market. This helps to understand the price direction in the future. Hence technical analysis involves much of mathematical calculations and statistical analysis. A number of technical analysis indicators have been widely used, again as per the perceptions and beliefs of the traders. Political, social, psychological and economic events largely affect the technical analysis. A good reason why technical analysis has gained much significance than any other analysis is its ability to gauge the very smallest movements in the market trends. Technical analysis indicators are many and are based on different ways of analysis. They are based on moving averages, volumes, volatility and range. Moving average based indicators include three types – Moving Average, Moving Average Envelope and Moving Average Convergence Divergence. The volume-based indicators are again classified into Volume, On Balance Volume, Chaikin Money Flow indicator and Accumulation/Distribution. The famous “Bollinger Bands†& “Fibonacci Retracement†are based on volatility analysis. Relative Strength Index and Stochastic method are based on range. Why Technical Analysis? technical analysis chart formations pdf ebookto Download :- Using Fibonacci is much easier than most people once thought, and it can help you set up your currency trades more effectively than other types of analysis. Fibonacci is the basis of many trading methodologies, and many billions of dollars are traded every year based on Fibonacci techniques alone. Let’s do cover a bit of ground before we can get to the charts. Fibonacci is best remembered for his Fibonacci sequence, which is the series of numbers where each number is the sum of the two preceding numbers. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55… As traders, we are most interested in the ratio between these numbers – called the Fibonacci ratios. By comparing the relationship between each number, and each alternate number, and even each number to the one four places to the right, we derive some fairly consistent ratios. The most important rations for trading are: .236, .50,.382, .618, .764, 1.382, 1.618, 2.618, 4.236, and for good measure we include 1.00…. This can start to look complicated, but it really isn’t. It turns out that the ratios are mathematical principles prevalent in nature all around us. What’s more is that these rations are even prevalent in man-made objects. There are many interesting, entertaining, and poetic observations about Fibonacci numbers and ratios in the universe. Fibonacci numbers and ratios appear in ancient buildings, in plants, planets, molecules, the dimensions of human bodies, and of course rabbit populations. But of what use is all that to the intrepid trader? Traders usually study charts! Fibonacci ratios may be applied to the price scales and also to the time scales of charts. Many traders and analysts will apply Fibonacci analysis to the price scale. Since prices never move in a straight line, you will easily see the ebb and flow of a currency on chart. More importantly, you can see how currency prices advance and retrace, and this is the key to using Fibonacci. All currencies that are liquid will often retrace and advance in Fibonacci proportions, but not always.
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