The basis of intraday trading is technical analysis. For novice traders, the most important thing is to start with its development. Thanks to technical analysis, you can learn to understand the charts and predict price changes.
What it is
Technical analysis is an approach based on working with various graphs, oscillators and information related to the history of prices. Without it, adequate trading, forecasting the value of currencies and an understanding of the market are impossible.
It includes many methods, for example, technical analysis figures, methods of displaying information (Japanese candles, bars, lines, area, Heiken Ashi indicator, etc.), as well as hundreds of popular indicators, tools for drawing on top of charts and much 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, goods - in general, any data plotted on a chart. Why is it needed? To predict further price behavior. For example, if you take the euro / dollar currency pair and data on it for a certain period, then based on them you can build a forecast of price behavior in the future. There is no fundamental difference with which trading instruments you will work with: futures, options or even Forex. Technical analysis is your assistant.
Start date
Technical analysis for beginners is a headache. You can and should study it endlessly, throughout the work related to trading. If you have chosen this path, then you need to improve constantly.
The work is quite hard and requires diligence. Endless graphs, numbers, various additional tools, programs, robots and much more - all this is a technical analysis. The course for beginners should contain at least the basics, namely: Japanese candles, trend lines, support and resistance, the simplest indicators, the concept of a time frame and some other things.
Types of Charts
In fact, there are not many of them. The most popular option is Japanese candles. 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 the same way. There is a simpler option that beginners love so much, but it is practically useless. This is a regular line. Nothing really is visible on it, it’s almost impossible to track any pieces of technical analysis, you can understand the current price direction at most. Nevertheless, any options have the right to life. There are other more exotic types of charts, however they are unpopular.
Timeframes
Such a complex foreign name will scare away many. 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 periods of information display. 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 most common and used today were given above. It is advisable to read about the relationship of these periods and understand that the younger form the older. So without this in any way.
Trends
These are price directions. The price can have only two directions, namely the trend up and down. However, there are still 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 a slight decrease occurs. This is normal, as is market noise. The golden rule of trading is to trade only in accordance with the direction of the price.
Indicators
This is more complicated. Technical analysis for beginners is not an easy 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 Waves.
Each of them has its own tasks, so it is recommended to study each separately. Try to search for information on 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 them in various combinations and variations.
Parting words
If you decide to seriously engage in foreign exchange trading, then read literature and forums, study various candlestick patterns and other information. As you already understood, the most important is a technical analysis for beginners. A book about one thing alone will not give a beginner a general picture, so it is best to look for information on forums and in various schools.