| As a currency trader, you need to understand the | | | | used extensively in technical analysis. Like the bar |
| various terms that are frequently used in Technical | | | | charts, the top of the vertical line represent the high. |
| Analysis. By definition, Technical Analysis is the study | | | | The bottom of the vertical line represents the low. |
| of historical and ongoing price data through charts, | | | | However, the price action between the open and the |
| price patterns and chart indicators. Charts display | | | | close is represented differently by the use of |
| price action in time intervals using bars and | | | | candlestick bodies. A shaded body represents a lower |
| candlesticks. | | | | closing price below a higher opening price. A hollow |
| Technical Analysis is based on the following | | | | body represents a higher closing price above a lower |
| assumptions. | | | | opening price. |
| 1) All available information is already impounded in the | | | | The price activity above and below the body is |
| market prices of the securities. | | | | referred to as wicks or tails. A trader may use a 3, 5, |
| 2) Prices always move in trends or patterns. | | | | 10, 15, 30, 60 and 180 minutes charts. For swing and |
| 3) History repeats itself meaning you can predict the | | | | position trading, a trader may use a daily, weekly or |
| future market by studying the past market prices. | | | | a monthly chart. These charts all use the Greenwich |
| Studies have shown that once a trend is in motion, it | | | | Mean Time (GMT) or the Eastern Standard Time |
| is most likely to continue rather than reverse it. The | | | | (EST) depending on the software that you use. But |
| more one studies chart patterns in technical analysis, | | | | you can always adjust them according to your local |
| the clearer it becomes that reading and interpreting | | | | time. |
| chart patterns and technical analysis are more an art | | | | You need to understand what are markets patterns? |
| form than a skill. | | | | What are Uptrends? What are downtrends? And |
| Charts come in two types: Bar and Candlesticks. Bar | | | | what are sideways trends? Markets expand and |
| charts display price data in vertical lines which | | | | retrace constantly. It is the nature of the market to |
| represents price action during a given time period. | | | | surge and then pause and retrace. Market prices may |
| The tip at the top is the high for the period and the | | | | continue to expand for sometimes either upward or |
| tip at the bottom is the low for the period. The open | | | | downward. |
| and close are represented by small horizontal dashes | | | | Trends make a series of peaks and troughs as they |
| called tics. The tic to the left of the line is the open | | | | move. An uptrend consists of a series of ascending |
| and the tic to the right of the line is the close. | | | | peaks and troughs. A downtrend consists of a series |
| Candlestick charts are similar to bar charts in many | | | | of descending peaks and troughs. A sideways trend |
| ways but different in other ways. Candlestick charts | | | | consists of a series of horizontal peaks and troughs. |
| were developed by Japanese rice traders. They are | | | | |