HOW TO ANALYZE MARKET: TECHNICAL ANALYSIS
Investing in forex means keeping under control the price because there are cases in which it can literally surprise us.
The market technical analysis offers to traders a great reference in order to follow the price and trends occurring both in short and long term.
Nevertheless, the interpretations that can be given to a chart can be different depending on the trader who observes it. In this regard, we seek to establish what are the basic criteria to draw rational conclusions.
HOW TO ANALYZE MARKET TRENDs
How to analyze the market?, This is one of the questions that our readers often ask us by e-mail, the answer is simple but not obvious. The market is analyzed according to those that are the basis of technical analysis. The graph of price discounts everything, ie, it shows the current market dynamics and the future ones.
Analyze the price is the most important step to do, see how to get started.
The first thing to do is cyclical analysis. We need to determine where we are in order to better orient ourselves and avoid that certain price movements are not clear.
The best thing to do to determine in which step of the cycle we are in, is to analyze the previous economic cycle. To do that just set the chart time frame W1, thus, each candle represents the evolution of the price in a week.
Having done this, we isolated the previous cycle, and we can start to analyze the current one. Always draw our scheme to the point where we arrived. We may be at the beginning of a cycle or half or even towards the end.
IDENTIFY CYCLE STAGES
Having as starting point the previous cycle, we can immediately see if we are currently in the bull or bear phase. In case in which we are in front of the beginning of a bull phase then the price, despite the various correction movements, would tend to rise for about 1-2 years. In case in which we are in front of the beginning of a bear phase, then, the price would tend to fall always for about 1-2 years. The duration is statistic, therefore, it is not sure that a bull phase lasts necessarily from 1 to 2 years, but definitely can not last less than 1 year.
Once we have found in which phase we are, we just have to draw the trend line that will represent the primary trend and invest depending on the phase type. During the course of the phase there will be two movements of correction in which the price for a certain period will go against the trend. In these phases, we can act in three ways:
- We do not do anything, surely the price will rise then
- We monetize and invest when the price will rise again
- We monetize and invest in the opposite trend
All three ways are valid, but if you’re a beginner, you should avoid investing in countertrend, it would be dangerous and difficult to manage.