Technical analysis methods are mainly used to determine the future direction of the market through statistical and mathematical calculations and chart drawing based on historical price and quantity data.
Technical analysis methods are mainly used to determine the future direction of the market through statistical and mathematical calculations and chart drawing based on historical price and quantity data. Generally speaking, technical analysis methods can be divided into five categories: K-line, tangent, indicator, wave, and morphology. Below, HMA Huangma Foreign Exchange Editor will specifically analyze these types of technical analysis methods.
By studying the graph formed by the movement of the K-line over a certain period or multiple periods of time, we can infer the power comparison between multiple parties and short parties in the current market and finally come up with corresponding trading methods. From the morphology of price trajectories, it can be inferred what kind of environment the market is in, which provides certain guidance for future investments. It can be inferred that the strengths of both the long and short sides of the market are compared, and then it can be determined whether the advantage of both the long and short sides is temporary or decisive. Common forms: head and shoulder top, red three soldiers, arc bottom, etc.
According to the corresponding methods and means, draw some straight lines on the data graph of the exchange rate, and then infer the short-term fluctuation of the exchange rate based on these straight lines. The study of entry lines is generally used to determine support and resistance lines. The function of the tangent is mainly to support and exert pressure. The backward extension position of the support line and pressure line has a certain constraining effect on the price trend. The drawing method of tangents is the most important, as their quality directly affects the predicted results. At present, there are many ways to draw tangent lines, which are the essence of people's long-term research. Famous ones include trend lines, channel lines, etc. In addition, there are golden section lines, Gan's lines, angle lines, etc. In practical applications, people benefit a lot from these online platforms.
Indicators should consider various aspects of market behavior, establish a mathematical model, provide mathematical calculation formulas, and obtain a number that reflects the inherent essence of a certain aspect of the foreign exchange market. This number is called the indicator value. The specific values and interrelationships of indicator values directly reflect the state of the foreign exchange market and provide guidance for operational behavior. The indicators mostly reflect things that cannot be directly seen from market reports.
At present, there are countless technical indicators of various names used in the foreign exchange market worldwide—at least over a thousand. For example, relative strength index (RSI), random index (Stochastic oscillator), trend index (DMI), smooth similarities and differences average (MACD), energy surge (OBV), psychological line, Bias ratio, etc. These are well-known technical indicators that have been thriving and enduring in the stock market. Moreover, over time, new technical indicators are constantly emerging.
Eliot, the inventor and founder, judged foreign exchange trading through the waves formed during the operation of exchange rates. This kind of fluctuation also needs to be carried out according to the natural trend of fluctuations. Simply put, an increase is five waves, and a decrease is three waves.
The most important motto about technical analysis is 'Trends are your friends'. Because once the trend is established, it will definitely move forward according to the rules and will not easily change. Finding the dominant trend will help investors take a holistic view of the market and provide us with sharper insights, especially when short-term market fluctuations disrupt the overall market.
Morphology is a method of predicting the future trend of foreign exchange prices based on the trajectory of past time in price charts. The pattern of price movement is an important part of market behavior, and it is the specific manifestation of the foreign exchange market's perception of various information. It is reasonable to speculate on the future of foreign exchange prices using price trajectories or patterns. From the shape of the price trajectory, it can be inferred what kind of environment the foreign exchange market is in. There are more than ten famous forms, including M head, W bottom, head, shoulder, top, bottom, etc. These forms are also the crystallization of people's wisdom.