In today’s blog post I will be going over (briefly) the top 3 most important aspects of technical analysis. The topics covered today need to be mastered before you make an attempt to learn more advanced TA, or place a trade on a live account. For those that have read my past blog post on What indicator should I use, if any? by Forex Lens on Forex Lens Analysis , it’s quite clear that I take a naked trading approach to my analysis. For those of you that tune into our live sessions, this isn’t anything new. A trading straggly that is solely based on foundations of technical analysis, can be profitable if used correctly.
So, without any more bickering, let’s get into the foundations of technical analysis.
SUPPORT AND RESISTANCE ZONES
I cannot stress how important is to know how and when to draw these ZONES (NOT LINES), If you’re scratching your head on why I call them zones, please read my previous blog post on that, here: Support / Demand and Resistance / Supply Zones by Forex Lens on Forex Lens
Practice drawing these zones and implement them into your trading. I advise you test the significance of these zones on a demo account, so you can get a sense of how the markets react in and around these areas of price.
One of the most common strategies are trading trend-line breaks. To implement this strategy, one first needs to understand how to draw a correct trend-line. A correct trend line is one that has at least to points and one that does not go through any candles (unless you’re drawing them from the past). Trend lines help one identify the higher-highs and higher-lows of an uptrend and the lower-highs and lower-lows for a downtrend. A break of a trend-line usually signifies a change sentiment (or at least that is what people think). Ideally, you would want a break of a trend-line, a retest, and a rejection before entering a sell/buy.
Go to TradingView and practice identifying viable trend-lines from varying time frames and learn to make sense of breaks and retests. When this technique is mastered, it can lead to a substantial increase in profitability. It’s very versatile, and can be used in intraday trading, swing trading and even scalping.
Candlesticks & Patterns
The candles tell the tale, and are a trader’s best friend, there are many candlesticks and patterns out there, but some of my favorite are pin bars, shooting stars, dojis and engulfing candles. You can find examples of these on Google and on TradingView. Learn what each candle signifies and use them as additive confluence to your analysis. Candles are a great way to get more confirmation and assurance to your analysis.
These are my top 3 things to master in the beginning stages of learning technical analysis. Once you have mastered them, you can move onto more advance concepts. Even used by themselves, these aspects of technical analysis can be proven to be profitable.