{"id":16659,"date":"2020-03-31T00:42:16","date_gmt":"2020-03-31T07:42:16","guid":{"rendered":"https:\/\/www.tradingheroes.com\/?page_id=16659"},"modified":"2024-04-02T01:20:56","modified_gmt":"2024-04-02T08:20:56","slug":"technical-analysis-explained","status":"publish","type":"page","link":"https:\/\/www.tradingheroes.com\/free-forex-trading-course\/technical-analysis-explained\/","title":{"rendered":"Chapter 4: Technical Analysis Explained"},"content":{"rendered":"

Technical analysis is based on one simple concept: <\/strong>Previous price behavior can give you clues as to what price will do in the future.<\/p>\n

If you think that this is a little too much like witchcraft and it could not possibly work, then consider this…<\/p>\n

Forget for a moment that this is a Forex chart.<\/p>\n

\"Price<\/p>\n

Let's just say that it's a chart of the price of…a certain type of pen.<\/p>\n

\"Pen<\/p>\n

When the price of the pen gets to 1.033 (the orange line), pen companies start producing more and supply increases. With more supply available, people have more choices for buying pens and the the market value of the pens will start to decrease.<\/p>\n

Then supplies get low and prices start to go up again.<\/p>\n

Makes sense right?<\/p>\n

Now when you trade Forex, stocks or any other market, there are hundreds of factors that can come into play that can affect prices.<\/p>\n

It's not just about supply and demand.<\/p>\n

However, technical analysts believe that almost everything you need to know about these market forces is expressed on a chart. Market analysts can give all the opinions they want about what the market will do next, but the only thing that matters is what happens on the chart.<\/p>\n

…at least that's what technical analysts believe.<\/p>\n

A Quick Tutorial on Charting Types<\/h2>\n

Now let's take a look at the different types of charts out there. Some charts give you more information about what price is doing than others, so it's important that you understand the difference. Here are the graphs that most traders use.<\/p>\n

Line Graph<\/h3>\n

A line graph only plots one price out of the: open, high, low and close. The closing price is usually used.<\/p>\n

This can be useful with certain styles of trading, but it's generally not as useful as other types of charts because it only shows you one data point per time period.<\/p>\n

\"Forex<\/p>\n

Bar Graph<\/h3>\n

Bar graphs are generally more useful than line graphs because they show you three more pieces of information than a line graph:<\/p>\n