Forex Technical analysis

Candlestick chart-Support and Resistance-Trendline Analysis-Candlestick Reversal Pattern-Elliott Wave Theory

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Forex Technical analysis
Technical analysis is the study of price movement on a chart of a particular FOREX currency pairs or other TRADING instruments. Considered as a sort of framework that traders use to study and analyze the price movement of a market, the primary reason for using the technical analysis is to make predictions about future price movement based on past price movement.

Candlestick chart

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Candlestick chart is a type of financial chart used to describe price movements of a security, derivative and currency. It was introduced by Japanese in 18th century.

Candlestick chart

Different shapes of the candlesticks:

Different shapes of the candlesticks

Support and Resistance

Support and resistance is one of the most widely used concepts in forex trading. Strangely enough, everyone seems to have their own idea on how you should measure forex support and resistance.

Support and Resistance

Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market). When the forex market moves up and then pulls back, the highest point reached before it pulled back is now resistance.

As the market continues up again, the lowest point reached before it started back is now support. In this way, resistance and support are continually formed as the forex market oscillates over time. The reverse is true for the downtrend.

The Reversal
Support becomes Resistance

 Support becomes Resistance

The dotted line represents the price that was able to prop up the price movement at points 1 and 2, but this support turns into resistance once the price falls below it, as illustrated by points 3 and 4.

Resistance becomes Support

Resistance becomes Support

The dotted line represents the resistance at points 1 and 2 begin as price barriers, once the bullsare able to push the price above the dotted line; it becomes an area of support, as illustrated by points 3 and 4.

Trendline Analysis

Trendlines are probably the most common form of technical analysis in forex trading. They are probably one of the most underutilized ones as well.

In their most basic form, an uptrend line is drawn along the bottom of easily identifiable supportareas (valleys). In a downtrend, the trend line is drawn along the top of easily identifiableresistance areas (peaks).

Trendline Analysis

Green Line represent Support & Red Line represent Resistance

Candlestick Reversal Pattern

Bearish Reversal Pattern

When we can sell in Uptrend, how to fix Take Profit and Stop Loss

Candlestick Reversal Pattern

When the candle reaches new heights without breaking previous candle lows then it is UPtrend Pattern

Bullish Reversal Pattern

When we can buy in Downtrend, how to fix Take Profit and Stop Loss

Bullish Reversal Pattern

When the candle reaches new low without breaking previous candle heights then it is called Downtrend Pattern

Elliott Wave Theory

Elliott Wave Theory

Motive Wave (Impulse Wave)

  • 1st wave –Elliott Wave Formation
  • 2nd wave – 50 % retracement of 1st wave
  • 3rd wave – high fluctuation – Greater than 1stWave
  • 4th wave – 50% retracement of 3wave or greater than 2nd retracement wave and good support at 1st wave high
  • 5th wave – Largest wave or equal to 3rd wave

Correction Wave (Elliott Reserve Wave)

An Impulse pattern is always followed by a Corrective pattern

  • A wave – Correction wave formation with down trend
  • B wave – 50% retracement of ” A” wave
  • C wave –Will make new lows below the end of Wave A