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Technical Analysis OverviewThe investment decision is based out of two different ways: Fundamental Analysis: Analyzing a company's financial statement Technical Analysis: Understanding the market sentiment behind price trends Technical Analysis The study of statistical trends, collected from historical price and volume data, to identify opportunities for trade. Assumptions of technical analysis Market discounts everything History tends to repeat itself (psychological) Price moves in trend (reflexive) Trend A trend is the overall direction of a market or an asset's price identified by trendlines. Three possible trends: Uptrend: Asset going up, making higher highs or higher lows Downtrend: Asset going down, making lower highs or lower lows Sideways: Asset trades in horizontal channel Technical Analysis considers: (Basics of Technical Analysis) Price Chart Patterns Volume-Momentum Indicator Oscillators Moving Average Support Resistance levels Movements are not linear, the price will face resistance as it goes up or support as it goes down. -‍Resistance: Level where an uptrend can be expected to pause or rebound due to a concentration of sellers. -Support: Level where a downtrend can be expected to pause or rebound due to a concentration of buyers. Technical Indicators broadly serve three functions to alert, to confirm, and to predict. There are two types of indicators: Leading Indicator: Leads the pice, generates a signal for trading opportunities. Eg. Oscillators i.e. RSI, CCI, Stochastic, Williams %R, Momentum, etc. Lagging Indicator: Follows trends and patterns, reduces the risk in exchange for missing early opportunities. Eg. Moving Averages, Bollinger Band, and MACD. A few myths about Technical Analysis: TA is only for short trading or day trading- TA can be used in all time frames, from 1 minute monthly charts TA has a low success rate- Solely TA can give you profits if used effectively Technical Analysis is quick and easy- Continued success requires in-depth learning, practice, good money management, and discipline Ready-made technical analysis software can be helpful- Such software may provide insights about trends or patterns but cannot guarantee profits, use of backtesting is necessary TA can provide price predictions accurately- TA is about probability and likelihood, and not guaranteed thereby price ranges can be predicted The winning rate in TA should be higher- Profitability does not depend solely on win-rate, it also incorporates risk-reward ratio Limitations of Technical Anlaysis Tend to give mixed signals when used in isolation, confusing traders TA is all about probability and signal cannot guarantee a successful trade even after thorough analysis Often technical analysts use indicators in different methods and may form a biased view regarding the same stock Many a time the technical signal may lag, and by the time proper signal is generated it is possible that the trade might be over A single trading strategy may not work in all scenarios as markets tend to be extremely dynamic Few Trading Mistakes Beginners Make: Starting with real money The best way to get acquainted with trading rules is to have a demo with virtual money before investing in real money, you can perform paper trades on Mudrex Not examining situation by yourself Make your own strategy, test them on the Mudrex platform, and then follow the same plan to trade by understanding things on your own Inevitable Losses Set risk limits for yourself and trade accordingly and accept the losses you face Margin Trading in the beginning It is not recommended to margin trade until and unless you understand the risk completely as crypto trading is rewarding yet risky Following the herd Before making a start with real money, make a set of rules which needs to be followed and have stop losses to limit the loss incurred on your trade ---------------------------------------------------------------------------------------- If you find the post useful, please like and share our ideas with the community! - Mudrex
COINBASE:BTCUSDEducation
by Mudrex
19
XABCD Should Extend The Trend! This is continuation of my mini series about "When not to draw XABCD lines" It should be named part 2. "Picture is worth thousand words" Not any picture, if there is a picture about how XABCD works then its not worth so much. Almost every book will tell you that it works, but almost none will tell you when it doesn't work. For me I like to just deduce, not just merely believe stuff. This mini article is about why and when you should avoid drawing a XABCD lines. It tries to shed some light on the subject, its about limitations of XABCD strategy. There is no strategy based on pure system, every strategy is about planning which is based on reality, on chart not on fantasy, but on real market movements. Good strategy always ask, not to demand outcome, its planning which is based on probability, not on certainty. So we always ask "Based on market movements now, is it worth my time and money to draw XABCD lines?". On the chart, the red formation we classify as a Gartley pattern. Is it worth to even draw it? For me is not worth my time, for this reason. Fist we are seeing this blue corrections, I don't like this. I don't like the XA leg to be so much corrective. If you try to imagine purpose of XABCD formation in the context of Elliott, you can find that XABCD formation should extend the trend, so it should be simple this: 1. XA leg should be impulse in nature (5 wave pattern or similar to 5 wave) 2. ABCD legs should be corrective, ABCD should be correction to this impulsive XA leg. Its that simple, everybody with basic understanding of Elliott principle should get it, and it should be simple, we should not complicate this concept much. Simpler the better, corrective and impulsive, that's it! So why there is two formations on the chart? Its simple. If you see this Gartley pattern negated and market is going to this black D point, you should not be compelled to draw this black Bat formation, for the first reason and for the second which is this. After Gartley pattern is broken, you should not touch anything, because statistically there is no point in doing this. After that here are frequently moves against any formations and I encourage you just to study broken Gartley's. Some traders even use them to just play brakes (on the chart it would be if price exceed point X). So I hope that now we have some pictures and mini proves which are the charts itself, not to just take seriously any XABCD formations, but to be careful and seek better opportunity which is worth our time and money. The quality of traded formations reflects quality of our trading, which reflects our belief about our self worth.
by UnknownUnicorn93444
7