Technical Analysis – Chart Formations
It is important to note that the Technical Analysis Overview provided does not attempt to be a comprehensive treatment of Charting or Technical Analysis methods. There are numerous, well-written books on Chart Interpretation and Technical Analysis. A brief and simplistic review of some basic charting concepts are provided for reference or to stimulate further study. Please contact your broker for a recommended reading list on Charting and Technical Analysis.
Technical Analysis makes the assumption that history repeats itself. Any trading method or system that works well on a broad sample of historical data, may have validity when applied to future trading environments. One should keep in mind that the markets are dynamic. The forces that motivate price movement are dynamic, and the participants are dynamic. Therefore any system which has performed well on past historic data may decline in value as the evolving dynamics of the markets change over time.
The assumption is made that trading results can be improved when trading skills are improved. This requires practice! Surely any time spent learning to trade on past historical data, will not be wasted when it comes to preparing to trade for the future.
A straight line usually drawn to define an uptrend against or through price bar lows.
A straight line usually drawn to define a downtrend against or through price bar highs.