Learning

 Fundamental and Technical analysis together form a unified investment framework for analyzing every financial marketLEARNING

Education and training are necessary before start trading for real money. Successful trading is all about learning, training, and trading with discipline.

Market conditions in the global financial markets change by the day. Nevertheless, there are some particular rules that are always valid. For example, the need to diversify your portfolio is always the same.

Fundamental and Technical analysis together form a unified investment framework for analyzing every financial market. Fundamental analysis aims to identify fair value and profitable trades, while technical analysis focuses on identifying the right timing for entries. Time is a very important parameter for all traders. Technical analysis using patterns, indicators, and several other tools can help traders to optimize their entry/exit in the market. Technical analysis cannot predict the future but it is still a very important tool for placing the right trade orders. 

But in order to trade profitably, you need also an effective trading strategy that is compatible with your risk profile, and a strong money management system. All your decisions concerning your portfolio must be driven by this particular strategy. Designing and implementing a trading strategy with discipline and by having always time on your side is very important. Trying to get rich in a very short timeframe without any strategy will only lead you to the total loss of your trading capital.

 

Fundamental Analysis

Fundamental analysis is a commonly used method for measuring the intrinsic value of a financial-traded asset based on the observation of economic and other 'hard' data.

Including:

  • Introduction to Fundamental Analysis
  • Investment Risk (2 categories and 10 sources)
  • Categories of Financial Ratios
  • Valuation of Stocks & Industries
  • Commitments of Traders (COT) Report
  • Treasury Bills (T-Bills) and their Correlation with Equity and Forex Markets

More about Fundamental Analysis

Exact Swing Points -Support & Resistance

By Adrian Jones

Learn a Swing Trading strategy that’s so easy even a beginner trader could be trading it in no time! In this article, you will learn how to determine where exactly the support and resistance points and the swing points are on a chart. This is a particularly important lesson! Just about every system or method of trading at least takes note of where the key support and resistance levels are. I’ll discuss a double use for this method of identifying these points.

Now, how do you know where support and resistance really is?

The problem with Support and Resistance (S&R) is that it is not a definite number. It is not an exact point on the chart at which price will, without any hesitation stop.

In fact, S&R is actually an area – it is not an exact number as we would all like to think.

The dilemma, of course, is that in order to do our calculations we need an exact point. You can’t enter $50.10/20 area when using Fibonacci or working out your stops and limits. You need an exact number even though S&R is not an exact number.

Try telling your broker that you want a stop loss at somewhere between 50 and 55 and watch him burst a blood vessel. This is what I want to concentrate on in this lesson. This is a technique I have found to be particularly good at not only identifying strong S&R points but also swing points. In order to find S&R, we must first identify market swing points. There are various ways of doing this but I am going to use the one I have used for years.

 

■ Swing Up

Technical analysis can be applied to all kind of financial markets like stock-markets, commodity markets and the currency exchange market.The Full Technical Analysis Guide

Technical analysis is a trading method that aims to forecast the future price movement of a financial-traded asset based on past market data such as price movement and volume.

1. Introduction to Technical Analysis

Technical analysts use charts, patterns, indicators, and oscillators in order to identify similarities in the current and past market activity that can suggest future price movements. Technical analysis can be applied to all financial asset classes and assets such as stocks, indices, Forex pairs, and commodities. Technical analysts focusing on two major aspects:

(i) What is the current price of a financial-traded asset 

(ii) What is the history of price movements of this financial-traded asset

Technical analysis cannot predict the future, but it can help investors to evaluate the possibility that a certain trend will continue or reverse. Furthermore, and most importantly, technical analysis can help investors to identify the perfect timing to enter/exit the market.

 

2. Major Assumptions of Technical Analysis

These are the major assumptions of technical analysis:

(a) Fundamental conditions and news are already incorporated in the current price level

A technical analyst doesn't care if an asset is fundamentally overvalued/undervalued in financial terms, he is focusing solely on strong trends that may generate trading profits.

(b) Prices are moving in trends

When a major trend has been established, the future price movement is likely to follow the same direction.

(c) Price movements are not totally random

(d) Historic trends usually repeat in the same patterns

This is happening as human psychology tend to repeat over time. Technical analysis uses chart patterns and indicators to analyze and evaluate these market movements and trends.

(e) There is no particular time-frame when you trade the market

Technical analysis can be applied in multiple timeframes.

4 MAJOR TYPES OF TECHNICAL ANALYSIS CHARTS

 

There are four major types of Charts:

 

1) Line Chart

A line chart represents the daily closing prices of financial securities. It is used for the observation of long-term trends but also to make comparisons with related financial variables. For example, observe the price of an oil company compared to the price of oil during a particular period of time.

 

2) Bar Chart

A bar chart is commonly used for the observation of short-term and mid-term price movements. It incorporates opening, closing, high and low price on a daily basis. The left dash represents the opening price, the right dash represents the closing price -while the upper edge of each bar represents the daily high and the lower edge represents the daily lows.

If the left dash (open) is lower than the right dash (close) then the bar will be colored black. If the left dash (open) is higher than the right dash (close) then the bar will be colored red or white. In simple words black bars represents upward closing prices and red (or white) bars downward closing prices.

Technical Analysis IndicatorsMajor Technical Analysis Indicators

  • What is a Technical Analysis Indicator?

Technical analysis indicators are mathematical calculations based on price volatility and volume activity. These indicators are used to evaluate the price trend but also to generate trade signals through price crossovers and divergences.

  • Oscillators

Indicators formed in a bounded range are called oscillators. Usually, an oscillator ranges between 0 and 100.

Here is some key information about MACD, RSI, and some other commonly used technical indicators.

1) MACD (Moving Average Convergence Divergence)

Type: Momentum Oscillator & Trade Signals Machine

□ Asset Classes: All Asset Classes

Chart: M30 and above

MACD is one of the most important technical analysis tools used for the analysis of a wide variety of financial assets (Forex pairs, Stocks, Indices, Commodities, Cryptocurrencies, etc.). MACD is a trend-following momentum oscillator which transforms two trend-following moving averages into a single momentum oscillator by subtracting the longer moving average to the shorter moving average.

Tips when trading with MACD:

(i) Prefer to use the MACD using its standard settings (12,26,9)

(ii) Divergences between the price chart and the MACD histogram can provide very important price reversal signals

(iii) MACD signals are more reliable in longer timeframes (H1 and above)

Elliott Wave Principle and the Stock-Market Cycles

 

An American accountant called Ralph Nelson Elliott studied the stock-market volatility during the 30s and concluded that certain price movements (patterns) tend to repeat themselves during different time frames. Until then investors considered market fluctuations as random events. Elliott supported that the stock market is moving in a recognizable pattern and that was called "Elliott Wave Principle".

The most crucial step in implementing the Elliott wave principle is to identify the pattern upon the market is moving today. Wave patterns consist of two phases: an impulsive and a corrective phase. Impulse phase is composed of five sub-waves (graph 1, 2, 3, 4, 5) and move in the same direction of the main trend. Corrective phase is composed of three sub-waves (graph a, b, c), and it moves against the main trend. In the graph below the basic Elliott Wave Pattern is presented.

 

Graph: Elliott Waves

The two Phases of the Elliot Wave Principal

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