Step one in technical research is to be taught the simplest way to read the charts. Here are one or two basic lessons to steer your early attempts. When first researching a currency pair, keep an eye open for the present trend. Begin with the long run charts ( monthly, weekly, and daily ), going back for one or two years. Because these charts contain a bigger quantity of info, they supply a more clear picture of just what the currency pair is doing than the near term charts ( hour, half-hour, 15-minutes, or 5-minutes ). Identifying the trend is simple : just look at the chart and judge whether the graph is going more up than down, or perhaps more down than up. Trends can be steep or shallow, years long or weeks short. Practice identifying them, and finding the points where they change direction. The longest-term trend is the strongest, which is an alternative reason for taking a look at those charts first. Even if you are scalping or day-trading and don’t plan to hold a position longer than an hour, you will do better by trading in the same direction as the existing trend. So bother to identify it on maybe the daily charts before beginning. There’s an old trader’s saying : The trend is your friend. It isn’t a lie. When you have identified the trend in the long term charts, compare that with what you see in the near term charts. You’ll find that there could be any amount of intermediate-term and short term trends in the trail set by the present trend. The graph will waver up and back down but often it’ll follow the trail set by the longest-term trend.
Next, find the SR levels, which are the floor and ceiling points on the graph.
These are major points on the chart where the price often will not wreck thru, or simply peeks through then gives up the fight. The price will go just so high or so low, but no further, it reaches that point then changes direction.
The more times that occurs, the stronger the SR are. Draw a straight line, either in your mind’s eye or on the chart, passing through almost all of the support points. Then draw another passing thru almost all the resistance points. This gives you an image of the trail the currency pair’s trend is following, called a price channel, and it is a straightforward but powerful tool to help figure out how that trail will continue.
When SR are powerful, the graph of the currency pair seems to bounce along sideways between those 2 lines like a pinball.
These lines do not want to be level. However it’s slanted, you can still trade within that range. When a currency pair breaks out of a price channel, frequently it falls into the channel, and on occasion it gains momentum and keeps moving. This last is referred to as a momentum market, and it is the other way to trade the range : set an entry order for the price to break out, either above or below the channel, then relax and let it ride. Congratulationsyou now understand the most critical parts of basic technical research!
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