Pathshala

What is Technical Analysis

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<span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-weight: normal;"><span style="font-size: small;"><b>Introduce </b></span></span></span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCYm7D9SRkiYOp0ovhpOnNidOAggR9JWcay9k1ujs8b4R3wXdqdkWuMPyghZ3fFIW04yiAIBmVjfwMkTVCExHqAgYB8L11tAjqrIeuvcqINZOGB_EHk5geHaoTfRdplV5sD4BWQ9wICCo/s1600/Introduce+of++Technical+Analysis.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="409" data-original-width="827" height="98" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCYm7D9SRkiYOp0ovhpOnNidOAggR9JWcay9k1ujs8b4R3wXdqdkWuMPyghZ3fFIW04yiAIBmVjfwMkTVCExHqAgYB8L11tAjqrIeuvcqINZOGB_EHk5geHaoTfRdplV5sD4BWQ9wICCo/s200/Introduce+of++Technical+Analysis.jpg" width="200" /></a><span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-weight: normal;"><span style="font-size: small;">A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use <a href="http://prkschool.blogspot.in/2017/06/what-are-charts-types-of-charts.html" rel="nofollow" target="_blank">charts</a> and other tools to identify patterns that can suggest future activity</span></span></span></span> 
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<span style="background-color: white;"><span style="color: #0c343d;">Technical Analysis -</span></span></h3>
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<span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="mso-bidi-font-family: "Times New Roman";"><a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">Technical analysts</a> believe that the historical performance of stocks and markets are indications of future performance. In a shopping mall, a <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">fundamental analyst</a> would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, the technical analyst's decision would be based on the patterns or activity of people going into each store.</span></span></span>

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<span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;">When day trading, a trader makes the decision about what to trade, when to trade, and how to trade, using either <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">fundamental or technical analysis</a>. Both forms of analysis involve looking at the available information and making a decision about the future price of the market being traded, but the information that is used is completely different. Is it possible to use both fundamental and technical analysis together, but it is more common for a trader to choose one or the other. <br /><br />Technical analysis is a method of forecasting price movements by analyzing statistics generated by market activity, such as previous prices and trading volume using charts and mathematical <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a> to identify patterns that can suggest future activity, as it is based on the belief that the historical performance of stocks and markets are indications of future performance. <br /><br />Despite the technical tool that is used, technical analysis actually studies supply and demand in a market in an attempt to determine what direction or trend will continue in the future by studying the market itself. <br /><br />Almost every trader uses some form of <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">technical analysis</a>. Even <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">fundamental analysis</a> traders are likely to glance at price charts before executing a trade, as these charts help traders determine ideal entry and exit points for a trade. They provide a visual representation of the historical price action of whatever is being studied.</span></span></div>
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<span style="background-color: white;"><b><span style="color: #0c343d;">Benefits of Technical Analysis</span></b></span></h3>
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<span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;">•    Technical analysis focuses on price movement which is easily spotted at a glance through the charts.<br />•    Technical analysis applies to all charts, whether they are 5-minute charts for day trading or daily charts for longer term trading. <br />•    Trends are easily found as some <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a> can quickly display a currency or security that is exhibiting a trend.<br />•   <a href="http://prkschool.blogspot.in/2012/12/40-common-chart-pattern.html" rel="nofollow" target="_blank"> Patterns</a> are easily identified as charts displays previous patterns and help predicting future ones, as the market tends to repeat itself.<br />•    Charting is quick and inexpensive as such <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">technical indicators and tools</a> are available via the net and they are automatically represented according to built-in calculations. Most brokers nowadays offer them to clients as part of their package.<br />•    Charts and <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a> can provide a huge amount of information in only a few moments. There are more than fifty kinds of <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a> and each provides information on different aspect of how a currency or a security is moving.</span></span></div>
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<span style="color: #0c343d;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><br />How <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">technical analysis</a> applies can be different for each trader. Every trader has their own interpretation of where they see <a href="http://prkschool.blogspot.in/2012/12/6-trend-lines.html" rel="nofollow" target="_blank">trends</a> and <a href="http://prkschool.blogspot.in/2012/12/5-support-and-resistance.html" rel="nofollow" target="_blank">support</a>. They also have their own ideas on setting up their <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a>. The <a href="http://prkschool.blogspot.in/2012/12/17-technical-analysis-trading-indicators.html" rel="nofollow" target="_blank">indicators</a> and charts can be simple or sophisticated as they can provide only the most basic information on a trend or <a href="http://prkschool.blogspot.in/2012/12/5-support-and-resistance.html" rel="nofollow" target="_blank">support and resistance</a>, or go much deeper to provide information on the strength of a trend, how momentum is building, and whether formations are developing that the can be traded. <br /><br />It is important to understand that <a href="http://prkschool.blogspot.in/2012/12/3-three-types-of-market-analysis.html" rel="nofollow" target="_blank">technical analysis</a> is not an exact science, and may not always give accurate predictions of the market movement; however, it is very useful in trading. It makes up only one portion of what you need to know when trading, but it is a very important thing to learn. Understanding technical analysis will give the charts some meaning when you look at them and help you understand why certain price movements occurred. </span></span><br />
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Introduce A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Te...

Types of Stock Market Analysis

7:23 PM NBIG

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<span id="school-category-title">Types of Analysis</span>
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<span id="school-category-title"></span> </h2>
<span style="font-family: Arial,Helvetica,sans-serif;">Basically Stock Market Analysis by two main different methods and one supporting methods. The main two methods 
are work in different way. Both Method have different way of study a 
Stock. Investor or Traders has option to choose which method is suitable
 for his Strategy. <span class="" id="result_box" lang="en"><span class="">The third method plays a very important role in the success of the main two methods.</span></span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span class="" id="result_box" lang="en"><span class=""></span></span>There is no shortage of analysis for anyone interested in investing. A 
search for the term “stock market analysis” search result </span><span style="font-family: Arial,Helvetica,sans-serif;">About 11,10,00,000 results</span> (0.62 seconds) <span style="font-family: Arial,Helvetica,sans-serif;">on
 Google and well over </span><span style="font-family: Arial,Helvetica,sans-serif;"><span class="sb_count" data-bm="4">63,60,000 results</span> each on Bing, and Yahoo.</span><br />
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<span style="background-color: white;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Three Types of Market Analysis</span></span></h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">To begin, let's look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of market analysis:</span><br />
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<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Technical Analysis</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Fundamental Analysis</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Sentiment Analysis</span></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;"><br />It's kind of like standing on a three-legged stool - if one of the legs is weak, the stool will break under your weight and you'll fall flat on your face. The same holds true in trading. If your analysis on any of the three types of trading is weak and you ignore it, there's a good chance that it will cause you to lose out on your trade!</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Here’s a close look at each.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Fundamental Analysis</span></h4>
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<span style="font-family: Arial,Helvetica,sans-serif;">The 
goal of fundamental analysis is to determine whether a company’s future 
value is accurately reflected in its current stock price.</span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">Fundamental
 analysis attempts to estimate the value of a particular stock based on a
 variety of factors, such as the current finances of the company and the
 prevailing economic environment. Fundamental analysis also may include 
speaking with a company’s management team and assessing how the 
company’s products are received in the marketplace.</span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">When a 
fundamental review is complete, the analyst may decide the stock is an 
attractive opportunity because the market has underestimated its future 
prospects. The analyst also may determine the stock to be a “hold” or a 
“sell” if the value is fully reflected in the price.</span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">Technical Analysis</span></h4>
<span style="font-family: Arial,Helvetica,sans-serif;"></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Technical
 analysts evaluate recent trading movements and trends to attempt to 
determine what’s next for a company’s stock price. Generally, technical 
analysts pay less attention to the fundamentals underlying the stock 
price.</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Technical analysts rely on stock charts to make their 
assessment of a company’s stock price. For example, technicians may look
 for a support level and resistance level when assessing a stock’s next 
move. A support level is a price level at which the stock might find 
support and below which it may not fall. In contrast, a resistance level
 is a price at which the stock might find pressure and above which it 
may not rise.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Sentimental Analysis</span></h4>
<span style="font-family: Arial,Helvetica,sans-serif;">Sentimental analysis 
attempts to measure the market in terms of the attitudes of investors. 
Sentimental analysis starts from the assumption that the majority of 
investors are wrong. In other words, that the stock market has the 
potential to disappoint when “masses of investors” believe prices are 
headed in a particular direction.</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Sentiment analysts are often 
referred to as contrarians who look to invest against the majority view 
of the market. For example, if the majority of professional market 
watchers expect a stock price to trend higher, sentiment analysts may 
look for prices to disappoint the majority and trend lower.</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Which 
approach is best? There is no clear answer to that question. But it’s 
important to remember three things: Past performance does not guarantee 
future results, actual results will vary, and the best approach may be 
to create a portfolio based on your time horizon, risk tolerance, and 
goals.</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Keep in mind that the return and principal value of stock 
prices will fluctuate as market conditions change. And shares, when 
sold, may be worth more or less than their original cost.</span><br />
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Fundamental Analysis Sentiment Analysis Technical Analysis Types of Analysis Types of Stock Market Analysis

Types of Analysis Basically Stock Market Analysis by two main different methods and one supporting methods. The main two methods are...

3. Three Types of Stock Market Analysis

8:11 PM NBIG

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<h2>
Three Types of Market Analysis</h2>
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<ol>
<li><b>Technical Analysis</b></li>
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<li><b>Fundamental Analysis</b></li>
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<li><b>Sentiment Analysis </b></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">1.</span>Technical Analysis</h3>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Technical analysis is the framework in which traders study price movement. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The main evidence for using technical analysis is that, theoretically, all current market information is reflected in price. If price reflects all the information that is out there, then price action is all one would really need to make a trade. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Now, have you ever heard the old adage, "<b>History tends to repeat itself</b>"?</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Well, that's basically what technical analysis is all about! If a price level held as a key support or resistance in the past, traders will keep an eye out for it and base their trades around that historical price level. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Technical analysts look for similar patterns that have formed in the past, and will form trade ideas believing that price will act the same way that it did before.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"></span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span> <span style="font-family: "arial" , "helvetica" , sans-serif;"></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In the world of trading, when someone says technical analysis, the first thing that comes to mind is a chart. Technical analysts use charts because they are the easiest way to visualize historical data! </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">You can look at past data to help you spot trends and patterns which could help you find some great trading opportunities. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">What's more is that with all the traders who rely on technical analysis out there, these price patterns and indicator signals tend to become self-fulfilling. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As more and more traders look for certain price levels and chart patterns, the more likely that these patterns will manifest themselves in the markets</span>.</div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">You should know though that technical analysis is VERY subjective. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Just because Ralph and Joseph are looking at the exact same chart setup or indicators doesn't mean that they will come up with the same idea of where price may be headed.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtCPQjv8_7AAoVHiy0_Tb39c0X1bPEdm8ZC16yi3Gh2fYNo4PFG1xP5zm2qjS0aMhq5Ix9V-0QBJKDS7hmJmuhy5bMhbpuk87eWFbEXtjGtUb4f4MQJOnmSNfG7pbP7FvHurMXJfv1-_c/s1600/kindergarten-nosebleed.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="590" data-original-width="530" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtCPQjv8_7AAoVHiy0_Tb39c0X1bPEdm8ZC16yi3Gh2fYNo4PFG1xP5zm2qjS0aMhq5Ix9V-0QBJKDS7hmJmuhy5bMhbpuk87eWFbEXtjGtUb4f4MQJOnmSNfG7pbP7FvHurMXJfv1-_c/s200/kindergarten-nosebleed.png" width="179" /></a><span style="font-family: "arial" , "helvetica" , sans-serif;">The important thing is that you understand the concepts under technical analysis so you won't get nosebleeds whenever somebody starts talking about Fibonacci, Bollinger bands, or pivot points. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Now we know you're thinking to yourself, "Geez, these guys are smart. They use crazy words like 'Fibonacci' and 'Bollinger'. I can never learn this stuff!" </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Don't worry yourself too much. After you're done with the School of <i>Stock Market</i>, you too will be just as... uhmmm... "smart" as us.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><i>By the way, do you feel that green pill kicking in yet? Bark like a dog!</i></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">2. </span>Fundamental Analysis</h3>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Fundamental analysis is a way of looking at the market by analyzing economic, social, and political forces that affects the supply and demand of an asset. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is supply and demand that determines price.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all the factors that affect supply and demand. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In other words, you have to look at different factors to determine whose economy is rockin' like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of why and how certain events like an increase in unemployment affect a country's economy, and ultimately, the level of demand for its currency. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The idea behind this type of analysis is that if a country's current or future economic outlook is good, their currency should strengthen. The better shape a country's economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country's currency to obtain those assets. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In a nutshell, this is what fundamental analysis is:</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">For example, let's say that the Nifty- Sensex  has been gaining strength because the Indian economy is improving. As the economy gets better, raising interest rates may be needed to control growth and inflation. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Higher interest rates make INR-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first. As a result, the value of the INR will increase.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Later on in the course, you will learn which economic data drives currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You'll be spitting out interest rates like baseball statistics.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">But that's for another lesson for another time. For now, just know that the fundamental analysis is a way of analyzing a currency through the strength or weakness of that country's economy. It's going to be awesome, we promise!</span><br />
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3. Sentiment Analysis</h3>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Earlier, we said that price should theoretically accurately reflect all available market information. Unfortunately for  traders, it isn't that simple. The markets do not simply reflect all the information out there because traders will all just act the same way. Of course, that isn't how things work.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Each trader has his own opinion or explanation of why the market is acting the way they do. The market is just like Facebook - it's a complex network made up of individuals who want to spam our news feeds. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Kidding aside, the market basically represents what all traders - you- feel about the market. Each trader's thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The problem is that as traders, no matter how strongly you feel about a certain trade, you can't move the markets in your favor (unless you're one of the GSs - George Soros or Goldman Sachs!). Even if you truly believe that the stock price is going to go up, but everyone else is bearish on it, there's nothing much you can do about it.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As a trader, you have to take all this into consideration. It's up to you to gauge how the market is feeling, whether it is bullish or bearish. Ultimately, it's also up to you to find out how you want to incorporate market sentiment into your trading strategy. If you choose to simply ignore market sentiment, that's your choice. But hey, we're telling you now, it's your loss! </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Being able to gauge market sentiment can be an important tool in your toolbox. Later on in school, we'll teach you how to analyze market sentiment and use it to your advantage like Jedi mind tricks. </span></div>
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<h2>
Which Type of Analysis is Best?</h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Ahhhh, the million dollar question....</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Throughout your journey as an aspiring forex trader you will find strong advocates for each type of analysis. Do not be fooled by these one-sided extremists! One is not better than the other...they are all just different ways to look at the market.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">At the end of the day, you should trade based on the type of analysis you are most comfortable and profitable with. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">To recap, <b>technical analysis</b> is the study of price movement on the charts while <b>fundamental analysis</b> takes a look at how the country's economy is doing. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Market sentiment</b> analysis determines whether the market is bullish or bearish on the current or future fundamental outlook. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Fundamental factors shape sentiment, while technical analysis helps us visualize that sentiment and apply a framework for our trades. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Those three work hand-in-hand-in-hand to help you come up with good trade ideas. All the historical price action and economic figures are there - all you have to do is put on your thinking cap and put those analytical skills to the test!</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Let me pull out that three-legged stool again just to emphasize the importance of all three types of analysis. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Take out one or two legs of the stool and it's going to be shaky!</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br />In order to become a true Stock market master you will need to know how to effectively use these three types of analysis.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Don't believe us? </span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><br />
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Let us give you an example of how focusing on only one type of analysis can turn into a disaster. </span></div>
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<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Let's say that you're looking at your charts and you find a good trading opportunity. </span><span style="font-family: "arial" , "helvetica" , sans-serif;"><br />You get all excited thinking about the money that's going to be raining down from the sky.</span><br />

<span style="font-family: "arial" , "helvetica" , sans-serif;">You say to yourself, "Man, I've never seen a more perfect trading opportunity in the <span style="color: #0000ee;">stock market</span>. I love my charts. Mwah. Now show me the money!"</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">You then proceed to buy  with a big fat smile on your face (the kind where all your teeth are showing).</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">But wait! All of a sudden the trade makes a  move in the <b>OTHER DIRECTION</b>! Little did you know, one of the major banks in London filed for bankruptcy! Suddenly, everyone's sentiment towards Britain's market turns sour and everyone trades in the opposite direction! </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Your big fat smile turns into mush and you start getting angry at your charts. You throw your computer on the ground and begin to pulverize it. You just lost a bunch of money, and now your computer is broken into a billion pieces. </span><span style="font-family: "arial" , "helvetica" , sans-serif;">And it's all because you completely ignored fundamental analysis and sentimental analysis.</span></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">(Note: This was not based on a real story. This did not happen to us. We were never this naive. We were always smart traders.... From the overused sarcasm, we think you get the picture.) </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br />Ok, ok, so the story was a little over-dramatized, but you get the point.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Remember how your mother used to tell you as a kid that too much of anything is never good? </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Well you might've thought that was just hogwash back then but in forex, the same applies when deciding which type of analysis to use. </span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Don't rely on just one. </span></div>
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<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Instead, you must learn to balance the use of all of them. It is only then that you can really get the most out of your trading.</span></div>
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<h2>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Where do we go from here?</span></h2>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Now that you're done with Kindergarten and learned a little bit about each type of analysis, it's time to delve much deeper! Here's what's in store for the next few years of your life...</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><br />We're kidding, we're kidding! We're talking about the next few school years in the School of  stock market.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Grade school will be all about basic technical analysis tools. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">You'll learn all about the dynamics behind price action, such as support and resistance levels, candlestick formations, and common chart patterns. You'll experiment with leading and lagging indicators and discover how to use them in coming up with trade ideas. Sounds pretty exciting, doesn't it?</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">The remaining years of middle school and high school are devoted to studying more technical analysis tools.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">We'll take a look at the more advanced tools also such as pivot points, divergences, Elliott Wave Theory, and Gartley patterns. Sounds fancy? It's because they are! Bet you can't wait to get started on those!</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">College will be a bit more complicated since you'll be tackling both fundamental and market sentiment analysis at the same time. Talk about hitting two stones with one bird! You're the bird and the stones are... well, you get the point. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">A couple of reasons why we're putting fundamental and market sentiment analysis together: </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">By the time you reach college, you'll be so hooked on learning more about stock market that one lesson simply won't be enough. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">It is hard to draw the line between fundamental analysis and market sentiment analysis.</span></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As we mentioned earlier, fundamental factors are mostly responsible for shaping market sentiment. Those two types of analysis would take up both freshman and sophomore year of college.</span><br />
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Fundamental Analysis -3B Sentiment Analysis 3C Technical Analysis -3A Three Types of Market Analysis 3 Where do we go from here? -3E Which Type of Analysis is Best? -3D 3. Three Types of Stock Market Analysis

Three Types of Market Analysis Technical Analysis Fundamental Analysis Sentiment Analysis 1. Technical Analys...

Summary: Three Types of Analysis

8:30 PM NBIG

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<h3 class="title" style="text-align: left;">
Three Types of Analysis</h3>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><b>Q: What are the three main types of analysis?</b></span></div>
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<span style="color: blue;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Ans: </span>There are three basic types of  market analysis: 1. Technical Analysis 2. Fundamental Analysis 3. Sentiment Analysis</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><b> Q: Which type of analysis looks at historical price movements to determine the current trading conditions and potential price movement? </b></span></div>
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<span style="color: blue;">Technical analysis is the framework in which  traders study price movement. The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement.</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><b>Q:Which type of analysis looks at economic, social, and political forces that affect the supply and demand of an asset? </b></span></div>
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<span style="color: blue;">Fundamental analysis is a way of looking at the  market by analyzing economic, social, and political forces that may affect the supply and demand of an asset.</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span class="label">Q:</span></span><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">If you wanted to buy the euro because Germany's economy is booming, which type of analysis are you doing?  </span><span style="color: blue;"><span style="font-weight: normal;"></span></span><span style="color: blue;"><span style="font-weight: normal;"> </span></span></h4>
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<span style="color: blue;"><span style="font-weight: normal;">The
 idea behind fundamental analysis is that if a country’s current or 
future economic outlook is good, their currency should strengthen. The 
better shape a country’s economy is, the more foreign businesses and 
investors will invest in that country. This results in the need to 
purchase that country’s currency to obtain those assets.</span></span></div>
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<b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"> Q: When a trader believes that price will go up, he is feeling...</span></b><br />
<span style="color: blue;">The term “bullish” is used to describe that a person’s, or group’s, outlook on an asset is optimistic (i.e., that the asset will rise in value</span></div>
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<span style="color: blue;"><b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span style="color: black;"> Q: The market reflects all available market information because all traders have access to the same pieces of data.</span></span></b><br />The market basically represents what all traders – you, Price-crawler, or Celine from the don't shop – feel about the market. Each trader’s thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market regardless of what information is out there.</span></div>
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<span style="color: blue;"><span style="color: black;"><b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"> Q: Support and resistance levels are associated with what type of analysis?</span></b></span><br />Have you ever heard the old adage, “History tends to repeat itself“? Well, that’s basically what technical analysis is all about! If a price level held as a key support or resistance in the past, traders will keep an eye out for it and base their trades around that historical price level.</span></div>
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Summary: Three Types of Analysis Summary: Three Types of Analysis

Three Types of Analysis Q: What are the three main types of analysis? Ans: There are three basic types of market analysis: 1. Tech...

What Are Charts? Types of Charts.

8:41 PM NBIG

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What Are Charts?</h1>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots.  </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis with the most recent plot being the furthest right. The price plot for IBM extends from January 1, 1999 to March 13, 2000. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word “securities” refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easy-to-read graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between. </span></div>
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Types of Charts</h2>
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<b><span style="font-size: small;">Let's take a look at the three most popular types of charts: </span></b></div>
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<li><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Line chart</span></b></li>
<li><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Bar chart</span></b></li>
<li><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlestick chart</span></b></li>
<li><b>Point & Figure Chart</b></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Now, we'll explain each of the charts, and let you know what you should know about each of them. </span><br />
<h2>
<span style="font-size: small;">1. </span>Line Charts</h2>
<span style="font-family: "arial" , "helvetica" , sans-serif;">A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Here is an example of a line chart  </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-weight: normal;">Some investors and traders consider the closing level to be more important than the open, high or low. By paying attention to only the close, intraday swings can be ignored. Line charts are also used when open, high and low data points are not available. Sometimes only closing data are available for certain indices, thinly traded stocks and intraday prices. </span></span></div>
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2. Bar Charts</h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">A bar chart is a little more complex. It shows the opening and closing prices, as well as the highs and lows. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid. The vertical bar itself indicates the currency pair's trading range as a whole. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Perhaps the most popular charting method is the bar chart. The high, low and close are required to form the price plot for each period of a bar chart. The high and low are represented by the top and bottom of the vertical bar and the close is the short horizontal line crossing the vertical bar. On a daily chart, each bar represents the high, low and close for a particular day. Weekly charts would have a bar for each week based on Friday's close and the high and low for that week. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Here is an example of a bar chart  </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span><span style="font-family: "arial" , "helvetica" , sans-serif;">Take note, throughout our lessons, you will see the word "bar" in reference to a single piece of data on a chart.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">A bar is simply one segment of time, whether it is one day, one week, or one hour. When you see the word 'bar' going forward, be sure to understand what time frame it is referencing.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Bar charts are also called "OHLC" charts, because they indicate the Open, the High, the Low, and the Close for that particular currency. Here's an example of a price bar:</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Open</b>: The little horizontal line on the left is the opening price</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><b>High</b>: The top of the vertical line defines the highest price of the time period</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Low</b>: The bottom of the vertical line defines the lowest price of the time period</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Close</b>: The little horizontal line on the right is the closing price</span></div>
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<h2>
<span style="font-family: "arial" , "helvetica" , sans-serif;">3. Candlesticks Charts </span></h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Originating in Japan over 300 years ago, candlestick charts have become quite popular in recent years. For a candlestick chart, the open, high, low and close are all required. A daily candlestick is based on the open price, the intraday high and low, and the close. A weekly candlestick is based on Monday's open, the weekly high-low range and Friday's close.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlestick chart show the same information as a bar chart, but in a prettier, graphic format. Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block (or body) in the middle indicates the range between the opening and closing prices. Traditionally, if the block in the middle is filled or colored in, then the currency closed lower than it opened. In the following example, the 'filled color' is black. For our 'filled' blocks, the top of the block is the opening price, and the bottom of the block is the closing price. If the closing price is higher than the opening price, then the block in the middle will be "white" or hollow or unfilled. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Many traders and investors believe that candlestick charts are easy to read, especially the relationship between the open and the close. Grean/Blue White (clear) candlesticks form when the close is higher than the open and Reg/black (solid) candlesticks form when the close is lower than the open. The Grean/Blue/white and Red/black portion formed from the open and close is called the body (Green/Blue/white body or Red/black body). The lines above and below are called shadows and represent the high and low.  </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Here at  we don't like to use the traditional black and white candlesticks. They just look so unappealing. And since we spend so much time looking at charts, we feel it's easier to look at a chart that's colored. A color television is much better than a black and white television, so why not splash some color in those candlestick charts? We simply substituted green instead of white, and red instead of black. This means that if the price closed higher than it opened, the candlestick would be green. If the price closed lower than it opened, the candlestick would be red. In our later lessons, you will see how using green and red candles will allow you to "see" things on the charts much faster, such as uptrend/downtrends and possible reversal points. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">For now, just remember that we use red and green candlesticks instead of black and white and we will be using these colors from now on. heck out these candlesticks...! Awww yeeaaah! You know you like that! </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Here is an example of a candlestick chart  </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The purpose of candlestick charting is strictly to serve as a visual aid, since the exact same information appears on an OHLC bar chart. The advantages of candlestick charting are:<br />
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<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlesticks are easy to interpret, and are a good place for beginners to start figuring out chart analysis.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlesticks are easy to use! Your eyes adapt almost immediately to the information in the bar notation. Plus, research shows that visuals help in studying, it might help with trading as well!</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlesticks and candlestick patterns have cool names such as the shooting star, which helps you to remember what the pattern means.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Candlesticks are good at identifying marketing turning points - reversals from an uptrend to a downtrend or a downtrend to an uptrend. You will learn more about this later.</span></li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Now that you know why candlesticks are so cool, it's time to let you know that we will be using candlestick charts for most, if not all of chart examples on this site.</span><br />
<h2 class="sectionedit7" id="point_figure_chart" style="text-align: left;">
4. Point & Figure Chart</h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">All the charting methods shown above plot one data point for each period of time. No matter how much price movement, each day or week represented is one point, bar, or candlestick along the time scale. Even if the price is unchanged from day to day or week to week, a dot, bar, or candlestick is plotted to mark the price action. Contrary to this methodology, point & figure charts are based solely on price movement, and do not take time into consideration. There is an x-axis but it does not extend evenly across the chart.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The beauty of point & figure charts is their simplicity. Little or no price movement is deemed irrelevant and therefore not duplicated on the chart. Only price movements that exceed specified levels are recorded. This focus on price movement makes it easier to identify support and resistance levels, bullish breakouts and bearish breakdowns.</span></div>
<h2 class="sectionedit8" id="price_scaling">
Price Scaling</h2>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">There are two methods for displaying the price scale along the y-axis: <b>arithmetic and logarithmic</b>. An arithmetic scale displays 10 points (or dollars) as the same vertical distance no matter what the price level. Each unit of measure is the same throughout the entire scale. If a stock advances from 10 to 80 over a 6-month period, the move from 10 to 20 will appear to be the same distance as the move from 70 to 80. Even though this move is the same in absolute terms, it is not the same in percentage terms. </span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;"> A logarithmic scale measures price movements in percentage terms. An advance from 10 to 20 would represent an increase of 100%. An advance from 20 to 40 would also be 100%, as would an advance from 40 to 80. All three of these advances would appear as the same vertical distance on a logarithmic scale. Most charting programs refer to the logarithmic scale as a semi-log scale, because the time axis is still displayed arithmetically. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The chart above uses the 4th-Quarter performance of VeriSign to illustrate the difference in scaling. On the log scale version, the distance between 50 and 100 is the same as the distance between 100 and 200. However, on the arithmetic scale, the distance between 100 and 200 is significantly greater than the distance between 50 and 100.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Key points on the benefits of arithmetic and log scale charts:</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
<ul style="text-align: justify;">
<li class="level1"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Arithmetic scales are useful when the price range is confined within a relatively tight range.</span></div>
</li>
<li class="level1"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Arithmetic scales are useful for short-term charts and trading. Price movements (particularly for stocks) are shown in absolute dollar terms and reflect movements dollar for dollar.</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
</div>
</li>
<li class="level1"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Log scales are useful when the price has moved significantly, be it over a short or extended time frame</span></div>
</li>
<li class="level1"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;"> Trend lines tend to match lows better on log scale charts.</span></div>
</li>
<li class="level1"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Log scale charts are useful when gauging the percentage movements over a long period of time. Large movements are put into better perspective.</span> <span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
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</li>
<li class="level1"><div class="li">
<div style="text-align: left;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Stocks and many other securities are judged in relative terms through the use of ratios such as PE, Price/Revenues and Price/Book. With this in mind, it also makes sense to analyze price movements in percentage terms. </span></div>
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</li>
</ul>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
<h2 class="sectionedit2" id="how_to_pick_a_time_frame">
How to Pick a Time Frame</h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The
 time frame used for forming a chart depends on the compression of the 
data: intraday, daily, weekly, monthly, quarterly or annual data. The 
less compressed the data is, the more detail is displayed. </span></div>
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<span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Daily
 data is made up of intraday data that has been compressed to show each 
day as a single data point, or period. Weekly data is made up of daily 
data that has been compressed to show each week as a single data point. 
The difference in detail can be seen with the daily and weekly chart 
comparison above. 100 data points (or periods) on the daily chart is 
equal to the last 5 months of the weekly chart, which is shown by the 
data marked in the rectangle. The more the data is compressed, the 
longer the time frame possible for displaying the data. If the chart can
 display 100 data points, a weekly chart will hold 100 weeks (almost 2 
years). A daily chart that displays 100 days would represent about 5 
months. There are about 20 trading days in a month and about 252 trading
 days in a year. The choice of data compression and time frame depends 
on the data available and your trading or investing style. </span></span></div>
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<span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
<ul>
<li class="level1" style="text-align: justify;"><div class="li">
<span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;">
 Traders usually concentrate on charts made up of daily and intraday 
data to forecast short-term price movements. The shorter the time frame 
and the less compressed the data is, the more detail that is available. 
While long on detail, short-term charts can be volatile and contain a 
lot of noise. Large sudden price movements, wide high-low ranges and 
price gaps can affect volatility, which can distort the overall picture.</span></span> <span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></span>
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<li class="level1" style="text-align: justify;"><div class="li">
<span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;">
 Investors usually focus on weekly and monthly charts to spot long-term 
trends and forecast long-term price movements. Because long-term charts 
(typically 1-4 years) cover a longer time frame with compressed data, 
price movements do not appear as extreme and there is often less noise.</span></span> <span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></span>
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<span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;">
 Others might use a combination of long-term and short-term charts. 
Long-term charts are good for analyzing the large picture to get a broad
 perspective of the historical price action. Once the general picture is
 analyzed, a daily chart can be used to zoom in on the last few months.</span></span></div>
</li>
</ul>
<h2 class="sectionedit9" id="conclusions" style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Conclusions</span></h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
<div class="level2">
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Even though many different charting techniques are available, one method is not necessarily better than the other. The data may be the same, but each method will provide its own unique interpretation, with its own benefits and drawbacks. A breakout on the point & figure chart may not occur in unison with a breakout in a candlestick chart. Signals that are available on candlestick charts may not appear on bar charts. How the security's price is displayed, be it a bar chart or candlestick chart, with an arithmetic scale or semi-log scale, is not the most important aspect. After all, the data is the same and price action is price action. <b>When all is said and done, it is the analysis of the price action that separates successful technicians from not-so-successful technicians.</b> The choice of which charting method to use will depend on personal preferences and trading or investing styles. Once you have chosen a particular charting methodology, it is probably best to stick with it and learn how best to read the signals. Switching back and forth may cause confusion and undermine the focus of your analysis. Faulty analysis is rarely caused by the chart. Before blaming your charting method for missing a signal, first look at your analysis.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The keys to successful chart analysis are dedication, focus, and consistency:</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></div>
<ul>
<li class="level1" style="text-align: justify;"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Dedication:</b> Learn the basics of chart analysis, apply your knowledge on a regular basis, and continue your development.</span></div>
</li>
<li class="level1" style="text-align: justify;"><div class="li">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Focus:</b> Limit the number of charts, indicators and methods you use. Learn how to use them, and learn how to use them well.</span></div>
</li>
<li class="level1"><div class="li" style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Consistency:</b> Maintain your charts on a regular basis and study them often (daily if possible).</span></div>
</li>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Q: Which kind of chart draws together one closing price to the next closing price over a certain period of time?</b></span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;"><b> </b>A: simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time.</span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b><span class="label">Q:</span> The bar chart is also called the...</b></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;"><b>A: </b>Bar charts are also called “OHLC” charts, because they indicate the Open, the High, the Low, and the Close for that particular currency.<span class="label"> </span></span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b><span class="label">Q:</span> What does the peak of the upper shadow of a candlestick indicate? </b></span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;"><b>A:  </b>The peak of the upper shadow of a candlestick indicates the high price.</span></span></div>
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Bar Chart 4/B Candlestick Chart 4/C Line Chart 4/A Types of Chart - 4 What Are Charts? Types of Charts.

What Are Charts? A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to ...

5. Support and Resistance

8:48 PM NBIG

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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><b><span style="color: black; font-family: "times new roman" , "serif";">Support and Resistance</span></b></span></span></h3>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Support and resistance is one of the most widely used concepts in trading.<br />Strangely enough, everyone seems to have their own idea on how you should measure support and resistance.</span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Let’s take a look at the basics first.</span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlzCkjR3D8d8PnedNR8ncUbkfPgUeYSvL48TNy6kR9i_Ww1XWDOdMmGCAiig704X_APj7-YbKnPX6E80zO9wqHZGV3cBqK3aPaA7dod0zUS8g73sZThmxE8vf8z6mYNrwJJ4yrfO5U64Y/s1600/lesson5-pic1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="285" data-original-width="525" height="173" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlzCkjR3D8d8PnedNR8ncUbkfPgUeYSvL48TNy6kR9i_Ww1XWDOdMmGCAiig704X_APj7-YbKnPX6E80zO9wqHZGV3cBqK3aPaA7dod0zUS8g73sZThmxE8vf8z6mYNrwJJ4yrfO5U64Y/s320/lesson5-pic1.png" width="320" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Look at the diagram above.</span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">As you can see, this zigzag pattern is making its way up (bull market).<br />When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.<br />As the market continues up again, the lowest point reached before it started back is now support.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">In this way resistance and support are continually formed as the market oscillates over time.</span><br />
<span style="color: black;">The reverse is true for the downtrend.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">Plotting Support and Resistance</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">One thing to remember is that support and resistance levels are not exact numbers.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it. With candlestick charts, these “tests” of support and resistance are usually represented by the candlestick shadows.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhr9J7a9vOkd9SXCpCFFTDEE8Tp_mVl2Ok2ee-pfHKKB05vbqfqzdnsbrAkhrxGg8roWh-FIxozcwDc5fLrMs-kjqpwzZ2n-5q60ESegtkRIPgNLy-xADCq7YniI1zxWsO06Owf3QSuN38/s1600/lesson5-pic2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="298" data-original-width="525" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhr9J7a9vOkd9SXCpCFFTDEE8Tp_mVl2Ok2ee-pfHKKB05vbqfqzdnsbrAkhrxGg8roWh-FIxozcwDc5fLrMs-kjqpwzZ2n-5q60ESegtkRIPgNLy-xADCq7YniI1zxWsO06Owf3QSuN38/s1600/lesson5-pic2.png" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Notice how the shadows of the candles tested the 1.4700 support level.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">At those times it seemed like the market was “breaking” support.</span><br />
<span style="color: black;">In hindsight we can see that the market was merely testing that level.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">So how do we truly know if support and resistance was broken?</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">There is no definite answer to this question.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Some argue that a support or resistance level is broken if the market can actually close past that level. However, you will find that this is not always the case.</span><br />
<span style="color: black;">Let’s take our same example from above and see what happened when the price actually closed past the 1.4700 support level.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB-IgcD7B73W_vD9v7B2s_FuKb3NTVwqV3dYH3ftY1X74W8PVSbIMRvsYZNhyfVnZ9L2h1Hy79R-Vt5jc3A7N0SrV2sJFE3SMZCOCVtb2SmJE_w6mzpkiY5ghrq5q2T-Dxs3fdCL1keCc/s1600/lesson5-pic3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="298" data-original-width="525" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB-IgcD7B73W_vD9v7B2s_FuKb3NTVwqV3dYH3ftY1X74W8PVSbIMRvsYZNhyfVnZ9L2h1Hy79R-Vt5jc3A7N0SrV2sJFE3SMZCOCVtb2SmJE_w6mzpkiY5ghrq5q2T-Dxs3fdCL1keCc/s1600/lesson5-pic3.png" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">In this case, price had closed below the 1.4700 support level but ended up rising back up above it.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">If you had believed that this was a real breakout and sold this pair, you would’ve been seriously hurtin’!</span><br />
<span style="color: black;">Looking at the chart now, you can visually see and come to the conclusion that the support was not actually broken; it is still very much intact and now even stronger.</span><br />
<span style="color: black;">To help you filter out these false breakouts, you should think of support and resistance more of as “zones” rather than concrete numbers.</span><br />
<span style="color: black;">One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart.</span><br />
<span style="color: black;">The reason is that line charts only show you the closing price while candlesticks add the extreme highs and lows to the picture.</span><br />
<span style="color: black;">These highs and lows can be misleading because often times they are just the “knee-jerk” reactions of the market.</span><br />
<span style="color: black;">It’s like when someone is doing something really strange, but when asked about it, he or she simply replies, “Sorry, it’s just a reflex.”</span><br />
<span style="color: black;">When plotting support and resistance, you don’t want the reflexes of the market. You only want to plot its intentional movements.</span><br />
<span style="color: black;">Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIK3ueNsa_3Pypxy9H9etoNpkky2oFTCNAVDnr4s-0LAg5K9CjiYlSvDNkA1P9Z6ql9hi5hIW8bjRTEpTgIZhPkWAu3684lrCITjbOerCHmRxw54kf9jOpsmruXw38NSICzt5JNKujURg/s1600/lesson5-pic-4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="298" data-original-width="525" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIK3ueNsa_3Pypxy9H9etoNpkky2oFTCNAVDnr4s-0LAg5K9CjiYlSvDNkA1P9Z6ql9hi5hIW8bjRTEpTgIZhPkWAu3684lrCITjbOerCHmRxw54kf9jOpsmruXw38NSICzt5JNKujURg/s1600/lesson5-pic-4.png" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">Other interesting tidbits about support and resistance:</span></b></span></h3>
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<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">When the price passes through resistance, that resistance could potentially become support.</span></span></li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is.</span></span></li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">When a support or resistance level breaks, the strength of the follow-through move depends on how strongly the broken support or resistance had been holding.</span></span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZpSZtrDiFow2untwLYKsI-kJ2i3tcOerrCCk_TeCeaYcDHPzisyF6TA96DGYC4OvnHZiW6mRnN6AAVENTOPVXZIeDn16KWs7hRnOs5Q8mXcZj9Tk2IdODAf76KoQb0vaABebfGifRd-8/s1600/lesson5-pic-5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="525" data-original-width="925" height="363" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZpSZtrDiFow2untwLYKsI-kJ2i3tcOerrCCk_TeCeaYcDHPzisyF6TA96DGYC4OvnHZiW6mRnN6AAVENTOPVXZIeDn16KWs7hRnOs5Q8mXcZj9Tk2IdODAf76KoQb0vaABebfGifRd-8/s640/lesson5-pic-5.png" width="640" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">With a little practice, you’ll be able to spot potential support and resistance areas easily.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">In the next lesson, we’ll teach you how to trade diagonal support and resistance lines, otherwise known as trend lines.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">Trading the Lines</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Now that you know the basics, it’s time to apply these basic but extremely useful technical tools in your trading.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Because here at BabyPips.com we want to make things easy to understand, we have divided trading support and resistance levels into two simple ideas: the Bounce and the Break.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">The Bounce</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">As the name suggests, one method of trading support and resistance levels is right after the bounce.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Many retail traders make the error of setting their orders directly on support and resistance levels and then just waiting to for their trade to materialize.</span><br />
<span style="color: black;">Sure, this may work at times but this kind of trading method assumes that a support or resistance level will hold without price actually getting there yet.</span><br />
<span style="color: black;">You might be thinking, “Why don’t I just set an entry order right on the line? That way, I am assured the best possible price”.</span><br />
<span style="color: black;">When playing the bounce we want to tilt the odds in our favor and find some sort of confirmation that the support or resistance will hold.<br />Instead of simply buying or selling right off the bat, wait for it to bounce first before entering.</span><br />
<span style="color: black;">By doing this, you avoid those moments where price moves fast and break through support and resistance levels.<br />From experience, catching a falling knife can get really bloody… </span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmXJn1bh0XP5hAKoLarFEbVhWDfGe-LmR3I8e8XnpIVleY7B0mOhmqeDjhyphenhyphenh6ad90QzxP6S_Y12c_LWRmc6rtpM3bYWj1JjvrOsX13NJa3CXIG4diPpcSH9lJ9VnF7aVm9fLIZnNOYtSM/s1600/lesson5-pic-6.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="241" data-original-width="451" height="170" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmXJn1bh0XP5hAKoLarFEbVhWDfGe-LmR3I8e8XnpIVleY7B0mOhmqeDjhyphenhyphenh6ad90QzxP6S_Y12c_LWRmc6rtpM3bYWj1JjvrOsX13NJa3CXIG4diPpcSH9lJ9VnF7aVm9fLIZnNOYtSM/s320/lesson5-pic-6.png" width="320" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjoLcSXaOyoavKrj0SuF9y0fYFYkbdFZrmHo9iNvpfwPR-aLjgFRBBzPe0E8L9rSH-bZKN8v-xF40-AbBTLHY7s_c4wcIxRcVYWBo7wLHv3iU8qapi7JTwFvLtpMfjhM9chQWEZXJ7w3s/s1600/lesson-5-pic-7.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="241" data-original-width="451" height="170" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjoLcSXaOyoavKrj0SuF9y0fYFYkbdFZrmHo9iNvpfwPR-aLjgFRBBzPe0E8L9rSH-bZKN8v-xF40-AbBTLHY7s_c4wcIxRcVYWBo7wLHv3iU8qapi7JTwFvLtpMfjhM9chQWEZXJ7w3s/s320/lesson-5-pic-7.png" width="320" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">The Break</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">In a perfect world, support and resistance levels would hold forever, McDonalds would be healthy, and we’d all have jetpacks. In a perfect trading world, we could just jump in and out whenever price hits those major support and resistance levels and earn loads of money. The fact of the matter is that these levels break… often.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">So, it’s not enough to just play bounces.</span><br />
<span style="color: black;">You should also know what to do whenever support and resistance levels give way! There are two ways to play breaks: the aggressive way or the conservative way.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">The Aggressive Way</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">The simplest way to play breakouts is to buy or sell whenever price passes convincingly through a support or resistance zone.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">The key word here is convincingly because we only want to enter when price passes through a significant support or resistance level with ease.</span><br />
<span style="color: black;">We want the support or resistance area to act as if it just received a Chuck Norris karate chop: We want it to wilt over in pain as price breaks right through it.</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTqMmxaxgl33QJfkv0X5t8TihKwf8clHlCPyV3zYYpgsBzzEoLTnuz71DYtYmhyphenhyphenhff5vRH55NgMf12TgGELhyphenhyphenSNbinVxdvLIy0QaHb-OQI5z4uyJ8aRHUAASRTjUiGh8NfJZYB6M4dn90/s1600/lesson5-pic-8.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="241" data-original-width="451" height="170" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTqMmxaxgl33QJfkv0X5t8TihKwf8clHlCPyV3zYYpgsBzzEoLTnuz71DYtYmhyphenhyphenhff5vRH55NgMf12TgGELhyphenhyphenSNbinVxdvLIy0QaHb-OQI5z4uyJ8aRHUAASRTjUiGh8NfJZYB6M4dn90/s320/lesson5-pic-8.png" width="320" /></a></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><b><span style="color: black; font-size: 13.5pt;">The Conservative Way</span></b></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Imagine this hypothetical situation: you decided to go long EUR/USD hoping it would rise after bouncing from a support level.<br />Soon after, support breaks and you are now holding on to a losing position, with your account balance slowly falling.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Do you…</span></span></span></div>
<ol start="1" type="1">
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Accept defeat, get the heck out, and liquidate your position?</span></span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">OR</span></span></div>
<ol start="1" type="1">
<li class="MsoNormal" style="line-height: normal; mso-list: l2 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">Hold on to your trade and hope price rises up again?</span></span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: black; font-size: 12.0pt;">If your choice is the second one, then you will easily understand this type of trading method.<br />Remember, whenever you close out a position, you take the opposite side of the trade.</span><span style="font-size: 12.0pt;"><br />
<span style="color: black;">Closing your EUR/USD long trade at or near breakeven means you will have to short the EUR/USD by the same amount.</span><br />
<span style="color: black;">Now, if enough selling and liquidation of losing positions happens at the broken support level, price will reverse and start falling again.</span><br />
<span style="color: black;">This phenomenon is the main reason why broken support levels become resistance whenever they break.</span><br />
<span style="color: black;">As you would’ve guessed, taking advantage of this phenomenon is all about being patient.</span><br />
<span style="color: black;">Instead of entering right on the break, you wait for price to make a “pullback” to the broken support or resistance level and enter after the price bounces.</span></span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKsFjEzVIl1mox7Ov-lJI_QD_QYEw9HdJqiad0_AjJ03XVU7K7wOUkCkg7GwJh4ne_VzTWSLm3BnaHiwP6rb3J33_lOy5I2nRSNQQx_oxjX8_CCEbabfOfb6wpMXRrnHhI6SEbeJGPhns/s1600/lesson5-pic9.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="241" data-original-width="451" height="170" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKsFjEzVIl1mox7Ov-lJI_QD_QYEw9HdJqiad0_AjJ03XVU7K7wOUkCkg7GwJh4ne_VzTWSLm3BnaHiwP6rb3J33_lOy5I2nRSNQQx_oxjX8_CCEbabfOfb6wpMXRrnHhI6SEbeJGPhns/s320/lesson5-pic9.png" width="320" /></a></div>
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<h3 style="text-align: left;">
<b><span style="color: black; font-family: "times new roman" , "serif"; font-size: 12.0pt;">A few words of caution… </span></b><span style="color: black; font-family: "times new roman" , "serif"; font-size: x-small;">THIS DOES NOT HAPPEN ALL THE TIME.<span style="font-family: "times new roman" , "serif";"> </span>“RETESTS” OF BROKEN SUPPORT AND RESISTANCE LEVELS DO NOT HAPPEN ALL THE TIME.<span style="font-family: "times new roman" , "serif";"> </span>THERE WILL BE TIMES THAT PRICE WILL JUST MOVE IN ONE DIRECTION AND LEAVE YOU BEHIND.<span style="font-family: "times new roman" , "serif";"> </span>BECAUSE OF THIS, ALWAYS USE STOP LOSS ORDERS AND NEVER EVER HOLD ON TO A TRADE JUST BECAUSE OF HOPE.   </span></h3>
<h2 style="text-align: justify;">
<span style="font-family: Arial,Helvetica,sans-serif;">Support becomes resistance (and vice versa)</span></h2>
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<span style="font-family: Arial,Helvetica,sans-serif;">

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<span style="font-family: Arial,Helvetica,sans-serif;">Another principle of technical analysis stipulates that support can 
turn into resistance and visa versa. Once the price breaks below a 
support level, the broken support level can turn into resistance. The 
break of support signals that the forces of supply have overcome the 
forces of demand. Therefore, if the price returns to this level, there 
is likely to be an increase in supply, and hence resistance.</span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">

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<span style="font-family: Arial,Helvetica,sans-serif;">The other turn of the coin is resistance turning into support. As the
 price advances above resistance, it signals changes in supply and 
demand. The breakout above resistance proves that the forces of demand 
have overwhelmed the forces of supply. If the price returns to this 
level, there is likely to be an increase in demand and support will be 
found.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEho3gWf7rvSKwOSIkpWT1XqxHt3Fc-BF2JJ33LIm5E-nUXnXTZqXT-DDWwYA4WWgocWmiU4HJ7pzdihw0EPEDOGHRJJuL_xsl6nS_v3Su_46Wnz2Eu3K67ZlYT4U_RFw0gnH7IeclEK6Ho/s1600/supres2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="395" data-original-width="651" height="387" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEho3gWf7rvSKwOSIkpWT1XqxHt3Fc-BF2JJ33LIm5E-nUXnXTZqXT-DDWwYA4WWgocWmiU4HJ7pzdihw0EPEDOGHRJJuL_xsl6nS_v3Su_46Wnz2Eu3K67ZlYT4U_RFw0gnH7IeclEK6Ho/s640/supres2.png" width="640" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">Conclusion </span></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">Identification of key support and resistance levels is an essential 
ingredient to successful technical analysis. Even though it is sometimes
 difficult to establish exact support and resistance levels, being aware
 of their existence and location can greatly enhance analysis and 
forecasting abilities. If a security is approaching an important support
 level, it can serve as an alert to be extra vigilant in looking for 
signs of increased buying pressure and a potential reversal. If a 
security is approaching a resistance level, it can act as an alert to 
look for signs of increased selling pressure and potential reversal. If a
 support or resistance level is broken, it signals that the relationship
 between supply and demand has changed. A resistance breakout signals 
that demand (bulls) has gained the upper hand and a support break 
signals that supply (bears) has won the battle</span>.</div>
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Support and Resistance 5. Support and Resistance

Support and Resistance Support and resistance is one of the most widely used concepts in trading. Strangely enough, everyone seems to ha...