In what direction the market moves there? What is the potential increase or decrease of action, to what level the market will go up there? or drop it? These are basic concerns that all active traders will arise before intervening in the markets. For that traders try to answer these questions based on graphs or mathematical formulas whose origin is frequently of famous mathematicians or theoretical (Example: John Bollinger, etc. ..)
All these mathematical formulas are used to define the potential upward or downward action. All these precepts are associated with a pseudo science, which is call’d the technical analysis. Mechanisms founding models of technical analysis can identify opportunities for buying and selling. Technical analysis offers a simple and effective method for understanding the evolution of financial markets. The following principles will help you better understand the evolution of an action using the basics of technical analysis, what are the trends, materials and resistors and oscillators.
The trend may be given by a simple observation of moving averages. The moving averages, which aims to smooth the way, we will quickly give way to price changes as based on the past. The trend over the short term will be given by the moving average to 20 jours.La trend over the medium term will be given by the moving average 50 days. The trend over the long term will be given by the moving average 200 days.
After tracing, our tendencies, we’ll draw our levels of support and resistance, which is really the best place to buy or sell a stock. To draw lines of support or resistance on a curve representing the course closing of each meeting, just search all the horizontal rows of points which is a course nearby. It is not necessary that the prices of these items have an identical course, tolerance of difference between the curve and the support or resistance depends on the observation period of the curve.
Now that we have anticipated the direction of the trend, we will devote ourselves to the study of oscillators for detecting areas of over-and oversold oscillators (RSI and stochastics, ..) to help identify overbought market and sold. While the moving average we will inform the direction of the market trend.
THE USE THEREOF, oscillators especially help us to detect trend reversal.
