Surefire Day Trading

Technical analysis and fundamental analysis are the two main methods of analysis.

Both, although vastly different, can be useful as forecast tools, either on their own or combined, to predict a price or movement.

Technical analysis

The study of the effect of market movement.

Price action is seen to reflect all the known information. Fear and Greed or expectations and emotions cause Buyers and Sellers to move the markets and as a consequence the Markets fluctuate.

It’s important to remember that actual price may not reflect the underlying value.

By studying charts of past market action, the Technical analyst has a method of predicting price movements and future market trends.

The technical analyst asks what has actually happened in the market, rather than what should happen.

Charts are then created as a primary tool from analyzed data derived from studying the price of instruments and the volume of trading.

The charts can assist experienced analysts to follow many markets and market instruments simultaneously.

Three essential principles are followed by the technical analyst:

1. Market action discounts everything! The actual price is a reflection of everything that is known to the market that could affect it.

2. Prices move in trends! Technical analysis is used to identify patterns of market behavior. Patterns allow for a high probability that expected results will be produced and some will repeat themselves on a consistent basis.

3. History will repeat itself! History has shown that the manner in which many patterns are repeated can lead one to the conclusion that human psychology changes little over time.

There are five categories in the Forex technical analysis theory:

1. Indicators (oscillators) for example:

Relative Strength Index (RSI): The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that the index is expressed in a range of 0-100.

Stochastic oscillator: This is used to indicate overbought/oversold conditions on a scale of 0-100%.

Moving Average Convergence Divergence (MACD): This indicator involves plotting two momentum lines.

2. The Number theory for example:

Fibonacci numbers: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34…) is constructed by adding the first two numbers to arrive at the third.

Gann numbers: Angles in charts used to determine support and resistance areas and predict the times of future trend changes.

3. Waves

The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence.

4. Gaps (high-low, open-closing)

Gaps are spaces left on the bar chart where no trading has taken place

5. Trends (following moving averages).

A trend refers to the direction of prices over a period.

Some common technical tools:

The Coppock Curve: an investment tool used for predicting bear market lows.

The DMI (Directional Movement Indicator) used to determine whether or not a currency pair is trending.

Posted By Admin

www.surefiredaytrading.com

To Learn More About “Next Generation” Trading Systems And Methods From Champion Traders, Go here!