Technical Analysis. HOW to identify trend,support and resistanceTechnical analysis
Technical analysis is a way to predict the future price movement according to the price chart. The price takes everything into account - this is the main idea of technical analysis. This idea means that we only need to see the price chart to find out where it will go in the future.
The main tools of technical analysis are trend lines, support and resistance lines. So how do you find them on the chart?
Downtrend and Uptrend.
The price is always in motion and when the price shows each new high below the previous one and each new low below the previous one - we say that there is a downtrend now and to make it clearly visible, analysts connect the highs and lows with lines - this is how the downtrend lines are drawn.
To identify an uptrend, the same idea is used, only in a different direction - every time the price forms new highs above the previous ones and new lows above the previous ones, we say that there is an uptrend now.
Support and resistance
Combining the highs and lows, technical analysts noticed that the price is facing resistance on the one hand and support on the other. These zones prevent the price from going higher or lower, depending on the trend. It is very important to see these zones, because, as a rule, trade is conducted from them.
Also, there are frequent moments when support, after its penetration, becomes resistance.
Remember
It is important to remember that the trend, resistance and support lines are just zones and the price sometimes goes beyond the lines, but then comes back. The price will make false breakouts of resistance or support from time to time. This is normal and it should always be remembered.
It is important that the price rebounds from these zones at least twice, so that there are reasons to draw lines and identify the trend.
Profitable Result
Thanks to these simple methods of technical analysis, a trader can easily determine the trend and avoid stupid money losses, the method will also help in the correct setting of stop orders, which will make your trading more accurate and more profitable.
Trend is your friend, be able to find it.
