Charting vs. Analysis

A chart is a visualization of the price over a specific time frame. Any financial instrument or product whose price fluctuates can be used to create a chart and analyze it. Thus, we can talk about exchange rates, stock prices, stock indices of raw materials or commodities. The vertical axis on the right represents the price range, and the horizontal axis represents the timescale. Traders can use many different types of charts, while some of the most popular are candlesticks, bar charts, line charts, dot charts, and more. When starting out with technical analysis, you should first learn some of the patterns that you can commonly see when looking at stock charts. We are talking about general directional movements called trends. It is quite easy to identify an upward and downward trend. Information about professional tools and their use will be provided by Webinar Universe.

Candlestick Charts

The candlestick chart originated in Japan and its history dates back to the 18th century. This is probably the most popular type of chart. Traders like it because of its ability to present information about the course of trading in a more readable way by filling the body of the candle with color. The construction of the candlestick is based on a horizontal line indicating the opening and closing and a vertical rectangle connected to these lines to form the body. A single line in the middle of the body is supposed to indicate the highest and lowest price in a given time frame. They are called wicks or shadows. At the beginning of your adventure with investing, it is worth taking an additional look at a training platform such as Webinar Universe.

Chart

The bar chart is very popular primarily in the United States. It shows four metrics: the opening price, the highest price in a given time frame, the lowest price and the closing price (O-open, H-High, L-Low, C-Close - OHLC). It gives a better idea of the course of quotations in a given period and their volatility than a line chart, it also informs about the price levels at which turning points appeared. Open, high, low, and close are essential to create bar charts for all kinds of time frames – minutes, hours, days, weeks, etc. The extremes being the highest and lowest prices are represented by the high and low of the vertical bar.

AT Tools

There are many technical analysis tools out there, so it's worth getting to know the most important ones. Candlestick patterns are divided into trend reversal and continuation patterns, allowing you to find turning points on the chart or generating a trend continuation signal. They are used for both short-term and long-term market analysis. The moving average, on the other hand, is one of the simpler indicators, which quite often generates very good signals. However, you need to remember to set the appropriate main parameter of the average. A trend line is also a simple tool. Fibonacci tools allow you to measure the range of individual impulses and corrections. Fibonacci retracements are horizontal lines indicating possible support or resistance levels where price could potentially reverse its direction. Of course, there are many more tools out there, but it could be overwhelming to learn all of them at once. You have to choose the ones that you actually understand and are appropriate for your situation. You can find information about the right tools on Webinar Universe.

Price Patterns

Those who use technical analysis look for repetitive price patterns on charts that may herald an impending trend reversal or its continuation. Patterns are an important part of m.in identifying price movements. They can be said to be characteristic patterns of the price chart. Price patterns are price movements that create repetitive shapes or geometric shapes on charts. In this way, they make it possible to predict the direction of a future breakout and the expected range of this movement. They are divided into two groups depending on the criterion of the generated signal. These are trend reversal and continuation patterns. What matters here is the development of the trading volume. It should be remembered that price patterns formed over a longer period of time are generally more effective than those identified on lower time frames. Characteristic features of specific price patterns include the shape, duration, and volume formation. They also indicate the range of future price movements. The real trick is to be able to recognize patterns other than those taking textbook patterns, as well as to distinguish between those heralding the continuation of a trend and those announcing its reversal.

Reversal patterns indicate weakness in an ongoing trend and signal the possible start of a move in the opposite direction. A sign of a reversal can be, m.in, patterns drawn at local highs, while those identified at local lows indicate a willingness to abandon the supply trend.

Continuation patterns confirm the continuation of the observed tendency. Opening positions based on them should take place after the whole system develops and breaks out. Trend continuation patterns are interludes in an existing main trend, which continues after a short-term consolidation (horizontal trend). Their duration is usually quite short (up to a few days or weeks). They occur after sudden price movements, most often in the middle of a large move.

Technical analysis is a tool that is primarily friendly to beginner traders. However, they need to get to know its specifics thoroughly. You will need to know the basic types of charts and how to analyze them. Individual charts may be easier or more difficult to interpret, and their level of reliability will vary depending on whether the analysis is short- or long-term.