Technical analysis for beginners: where to start?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The basis of intraday trading is technical analysis. For beginner traders, the most important thing is to start by mastering it. Through technical analysis, you can learn to understand charts and predict price changes.

What is this

Technical analysis is an approach based on working with various charts, oscillators and price history information. Without it, adequate trading, forecasting the value of currencies and understanding the market are impossible.

Includes many methods, such as technical analysis patterns, ways to display information (Japanese candles, bars, lines, area, Heiken Ashi indicator, etc.), as well as hundreds of popular indicators, drawing overlay tools charts and more. Its essence is that the trader finds certain patterns in the available information, and based on this, a forecast is born.

Where technical analysis is needed

It can work almost everywhere: currency, derivatives and stock markets, resources, commodities - in general, any data printed onschedule. Why is it needed? To predict future price action. For example, if you take the euro / dollar currency pair and data on it for a certain period, then on their basis you can build a forecast of price behavior in the future. There is no fundamental difference with which trading instruments you will work: futures, options, or even Forex. Technical analysis is your assistant.

Start learning

Technical analysis for beginners is a headache. You can and should study it endlessly, during all the work related to trading. If you have chosen this path, then you need to constantly improve.

The work is hard enough and requires diligence. Endless charts, numbers, various additional tools, programs, robots and much more - all this is technical analysis. A course for novice traders should contain at least the basics, namely: Japanese candlesticks, trend lines, support and resistance, the simplest indicators, the concept of a timeframe and some other things.

Types of charts

Actually, there aren't many of them. The most popular option is Japanese candlesticks. By the way, they appeared even before the birth of trading, exchanges and the Internet in general. The second option is bars. These are such stripes with dashes. They are somewhat similar to candles, but have a different appearance, although they show the opening and closing prices in exactly the same way. There is also an easier option that beginners love so much, but it is practically useless. This is a normal line. You can't really see anything on her.it is almost impossible to track any figures of technical analysis, the maximum you can understand is the current price direction. Nevertheless, any options have the right to life. There are other more exotic types of charts, but they are not popular.

Timeframes

Many will be put off by such a complicated foreign name. However, without this it is impossible to understand. In the terminal of your broker or on a third-party resource, each asset has its own information display periods. Namely:

• 1 minute (M1).
• 5 minutes (M5).
• 15 minutes (M15).
• 1 hour (1H).
• 4 hours (4H).
• 1 day (1D).

Depending on your service provider, these periods may be slightly different, but the above are the most common and used today. It is advisable to read about the relationship of these periods and understand that the younger ones form the older ones. So without it, nothing.

Trends

These are price directions. The price can have only two directions, namely the trend up and down. However, there are also lateral movements. This is a kind of uncertainty when the price fluctuates and cannot choose a direction. In addition, trends have pullbacks. This is when the price goes up, for example, but it cannot do it continuously, and there is a slight decline. This is normal, as is market noise. The golden rule of trading is to trade only according to the price direction.

Indicators

It's getting harder. Technical analysis for beginners istricky thing. And when it comes to various graphical indicators, it becomes even more difficult. The most popular indicators will be listed below:

• Relative Strength Index (RSI).
• Stochastic Oscillator.
• MACD.
• Bollinger Bands.

Each of them has its own tasks, so it is recommended to study each one separately. Try searching for information about these indicators separately, or use the help that brokers often offer on their platforms. These tools are often used in trading strategies, but there are countless of them in various combinations and variations.

Parting words

If you decide to seriously engage in currency trading, then read literature and forums, study various candlestick patterns and other information. As you already understood, the most important thing is technical analysis for beginners. A book about one thing will not give a beginner a big picture, so it is best to look for information on the forums and in various schools.