![]() ![]() For example, we use one-minute and five-minute bars in our system. They enable the viewer to see a graphical representation summarising the activity within a specified time frame. Price bars are a linear representation of a period of time. Tr = Volume or number of trades (not contracts) in that time period. Most computer programs will display a small box of data, usually called a display window, which will contain the following items: Therefore, by studying the price charts, you are indirectly seeing fundamental and market psychology simultaneously - after all the market is fed by two emotions - greed and fear - and once you understand that, then you begin to understand the psychology of the market and how it relates to the chart patterns. Thus, all fundamental factors are quickly discounted in price. It is the urgency between buyers and sellers in the trading pit that creates price movement. Price reflects the perceptions and action taken by the market participants. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal. ![]() Stochastic calculations produce two lines, %K and %D, which are used to indicate overbought/oversold areas of a chart. Conversely, as prices fall in a b down trend, closing prices tend to be near to the extreme low of the period range. The indicator is based on the observation that in a b up trend, closing prices for periods tend to concentrate in the higher part of the period’s range. This is used to indicate overbought/oversold conditions on a scale of 0-100%. ![]() An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation whereby prices have fallen more than market expectations). If the RSI is 70 or greater, then the instrument is seen as overbought (a situation whereby prices have risen more than market expectations). The RSI measures the ratio of up moves to down moves and normalises the calculation so that the index is expressed with a range of 0-100. This index is a popular indicator of the Forex (FX) market. Below are just a few basic points to help your understanding of technical analysis and currency chart reading. To be profitable in today's world of technology and advancement, one must be proficient in reading and, more importantly, understanding chart patterns and basic technical indicators. ![]()
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