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Today we will learn about the theory of technical analysis, types of Forex charts and trendlines.

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The theory of technical analysis

The theory for technical analysis is based on the presumption that you can forecast future price movements by studying historical market data, as it is believed that all current market information is reflected in the price. You can assume that all you need to make a trade is price action, technical analysis and study, charts to look for patterns and believe that, in similar situations, prices will act the same way as before. So, for example, if a price had bounced several times previously, a technical analyst would think that it will also do the same the next time the price reaches this level, so he sets his sell orders here. The more traders look for certain price levels and patterns. The higher the probability that these patterns will play out the way they think. Why is that? Because technical analysis is based on psychology, a child is nothing more than a picture of human emotions. The market moves because of two primary emotions, fear and greed, which compels humans to repeat past triumphs and mistakes. So remember, technical analysis is very subjective, and just because you see a pattern on the chart, it doesn't mean that the rest of the traders will interpret it in the same way. 

Types of Forex charts 

Length line chart - When there is a simple line.

Candlestick charts: When there is a bar, it is a bar chart and then a candlestick chart.

Line chart: A simple line connects the open, low, high, and closing prices.

Chart bar: Charts show us the opening, closing, low and high prices for each given section.

Horizontal line on the left - Shows the opening price.

Bottom of the vertical line: Shows the lowest price at a specific period.

Top of the line: Shows the highest price at a specific time period. 

(Note: Kindle stick charts display the same information as bar charts, but the visual representation is a lot better.)

Big blocks - Real bodies on top of the vertical lines of the block.

Lower shadows: The upper shadow and the lines that are under.

Resistance - a level that prevents prices from being pushed upwards.

(There are three golden rules for support and resistance.

First, the longer the price stays at the support or resistance level. The stronger it gets. This happens because the more pronounced the level becomes, the more traders will be placing their buy or sell orders there. So when a support or resistance level breaks, the stronger it has been and the stronger the next move will be in theory, every support should become resistance, and every resistance should become support. Here. You can see, for example, the price was rising and met resistance when it broke through. It was the same level from the upside and became the new support. The same can be seen in a downtrend price is falling; it needs help, and it manages to break through and tests the level. So this level will be the new resistance trend lines support the resistance lines cannot only be horizontal, but they also can be diagonal.)

 Trend lines: Diagonal support and resistance lines are drawn by connecting two or more prices, peaks or bottoms trends.

Let's learn more about trend lines,

if the currency pair is in an uptrend trader, wait for the price to approach a trend line, and if it acts as a support, they buy once the price bounces beyond the level. Conversely, if the price is trending down, traders wait for it to approach a trend line as the resistance and sell after it bounces down again, so remember the more time. Support and resistance levels have been tested the stronger they get, and the same goes for the trend lines. The biggest problem with trend lines is that they can be subjective, unlike horizontal support or resistance. If you tell five different people to draw a trend line, you will get five different trend lines. Here is an example for an uptrend, and the price is bouncing several times from the trend line. As you see in every bounce, in every touch of the trend line, you can open a byte order. Once broken, the trend line, if it was a support, becomes a resistance, and you can see here in this example how the price touched. The trend line from the downside and reacted shortly, but it reacted - and here is an example of a downtrend price - is falling. You have a downtrend, you draw your trend line. You see how price touched the trend line four five six times, then the price broke. The trend line and the resistance trend line now became the support it got tested, and then the price went up all right trend channels. A trend channel is another great tool for a trend trader. To make a channel. All you have to do is draw a line parallel to your trend, line channels are an excellent tool for setting your price target. So let's take a look at this example. You, if you just went short after the price bounced from this falling trend line. You didn't know where to take profit. If you draw a trendline parallel to your trendline, you can project where you can put your take profits so, based on it, you can calculate your target profits. You can find them on every charting platform. They are automated tools. You have to pick two points in a downtrend or an uptrend, and then one point in between in the middle of these two points up or down, and you will have your channel drawn for you.

That's all for today, folks!!

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