The Technical Analysis Principles are summarized in the following items:
1. What is a Market Trend?
A trend is the direction in which prices are moving. Trends may be Upward, Downward or Neutral.
2. Different Types of Trends
There are three types of trends: Upward, Downward and Neutral (also known as sideways).
3. Classification of Trends
Trends are classified in: short, middle and long term trends. Within each trend we may establish other minor trends, e.g. in a long term trend we may find different tranches where there are short-term upward trends and short-term downward trends.
4. Trend Lines
A trend line is the simplest and most important tool used by traders.
How do we draw an upward trend line? We must find at least two minimums on the chart where the second minimum must be higher than the first one. A minimum is the lowest price attained during a countertrend.
5. Information about Trend Lines
What is a trend line used for?
To identify possible changes in a currency’s trend.
Possible Buy: a limit of the support line may be used as a buy area.
Temporary Trend Line Transfers: close to or below the trend line.
6. Channel Lines
Channel Lines occur when prices move between two parallel trends, thus forming a Channel. There are Bullish, Bearish and Neutral Channels.
If a price touches the minimal trend, this may be used as a buy area and if a price touches the maximum trend, this may be used as a sale area.
7. Price Support Levels
The support level is a price area which is strong enough so that it is not possible to consider prices to drop even more.
8. Find Price Resistance Levels
A resistance establishes a price level where the selling interest is imposed upon the buying interest. Prices are held and drop.
9. 50%, 33% and 66% retreats
Prices may retreat in a portion or percentage of the current trend, before returning to the original direction. Countertrend movements tend to retreat a predictable percentage. The usual situation is a 50% retreat in the movement, although there are also 33% and 66% retreats.
10. Technical Analysis Application
Currency charts are a tool that may be used at intraday intervals (5, 15, 30 minutes), on an hourly, weekly or monthly basis.
If the trader adopts short positions it is convenient that he analyzes intraday charts (5, 15, 30 minutes). If he takes several-day positions, it shall be convenient for him to analyze daily charts with 1.4 hour intervals or daily charts. On a weekly or monthly chart we may analyze long-term trends. Long-term charts confer technical operators a larger reference margin for their trades.
