Archive for the ‘Novice Level’ Category
Trend lines
A trend is an upswing or downswing, that comes in waves, where the Japanese Candlesticks make on the upswings higher highs and higher lows on those waves. Lows and highs meaning the spiky ends of the Candlesticks, on top the high, below the low. On the downswings the waves make lower highs and lower lows. The lines are drawn at the ends of the lows on upswings and the ends of the highs on the downswings. This is usually the way to draw them, as shown on the weekly Tel Aviv 25 index below. The expertise in doing this comes with time and practice, and the benefit is knowing with a certain degree of certainty that the price is more or less likely to bounce off this line. The fact is that it IS a stronger line than a support/resistance line, to the best of my experience, no matter the significance of support/resistance lines and all that goes with that.
Sometimes the lines can be drawn on a line or closing-quotes chart. This is done at times with support/resistance lines also but the technique is used mainly for when drawing these lines is difficult on the candlestick chart or there is no line seen clearly on that chart.
Notice that there are parallel lines on the daily charts, the lower one is the most important to consider. The weekly chart is made of many mid-term lines that are each trend lines, though not strong trends.
This is to illustrate only, the true lines will come when you make them at your chosen charting software and they will get more and more useful and effective with practice.
please right-click your mouse on the Charts to get a clear view
This is the way the weekly Candlestick Chart looks:
And this is the way the daily upswing-line drawing looks:
This is the upswing Line Chart and the parallel trend lines it has:
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A guide to the perplexed
Many times is seems clearly to us that we know the direction the market is taking. Somehow we are not always successful in applying this to market orders and positions. We will concentrate here on the practical implementation of financial investments. I will propose several ideals that can serve as a foundation to start a process towards independence in investing and a reassessment of the investor’s opinions with regard to the financial markets.
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The decision-making process starts with several steps:
The Mapping of the personal assets in order to determine the relative exposure to the different financial asset types. Foreign currency or Bonds in foreign currency, cash or savings, stocks or options, commodities, etc.
Identification or exposure of the connection between the cross-linked assets that exist in the previous step. For instance, investment in equities abroad constitutes also investment in that country’s native currency, since you are paying for the financial instruments with the issuing country’s currency. If you want to benefit only from the equity, you have to protect against the possible losses from currency devaluation by hedging against that currency.
Discrimination among invested assets that are in reliable institutions and less reliable and clarification of the amount of liquidity they offer. For example, The Federal Reserve Bank is very reliable, offering its set of financial instruments of which many are able to be made into liquid assets. And for example, a savings account is only cash money on the day it matures, there are fines and penalties for taking out money from closed accounts.
The definition of the capital that is free for investment and that designated for independent management. For example; to possibly decide on initially investing 20% of one’s assets, and to augment the rate of exposure over time , that is, increase the rate of invested assets in the portfolio gradually over time. This usually obtains good results.
A determination of the amount of risk one is ready to take. There are the more secure, risk free opportunities with the proper amounts for investment that will enable one to sleep well at night. And if one invests more, the volatility may hurt his daily functioning. It is on each one to detect what level is good for him and follow up in his investing decisions so that he will always be able to sleep well at nights.
Target the purpose of the investment. For example, maybe what is desired is a fixed income for day-to-day use, the enlargement of capital wealth, or tuition and the like for gaining instruction towards the acquisition of a profession.
A determination of the availability and range of the investment activity. For example, a person who has regular work that is not connected to the financial framework, may not be able to take on himself the intense activity of managing a complex portfolio. Here I will emphasize a point: the larger the analytic time-frame; monthly as opposed to weekly and daily, so the chances of success is greater. If we will agree that the Technical Analysis exemplifies the psychology of the struggle between supply and demand, you will understand that a greater amount of opinions can be brought forth and analyzed at the larger time-frame, thus bringing us to a more accurate analysis. The amount of daily pointedly random news items we fix on get dwarfed when we take the more macro and long-term analytic approach.
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Support/Resistance lines
A support or resistance line (s/r line) is one line that functions for both. when th price level goes to it on the way up, it tends to stall, sometimes going back down to start, at least temporarily, a down cycle. Sometimes it will break through relatively fast and continue upwards, but the vast majority of the time it will go above the line somewhat go back down to the line to RETEST the line and after it will continue on its way up. That is to say, it meets RESISTANCE at the s/r line, passes it temporarily then somehow is drawn back to it, RETESTS that line and makes it now into its SUPPORT line, draws support from it and therefore continues upwards, bouncing off the support.
There are other instances, for example the false break, where the price line or candlestick crosses the line 1 or 2 times and then withdraws, sometimes damaging our false hopes.
I always draw s/r lines on the candlestick chart, trying to match the lows and highs (intra-day) on the ends of the candle wicks. When that is not possible, for lack of wicks or simply that other places on the line already match, I use the closing (line) chart to check my accuracy. Sometimes, the only method to use is the line chart, when there is no other choice.
Making accurate and testable s/r lines takes a lot of practice. And it has to be tested to have functioned for long periods of time to show its strength. A line is stronger the more history it possesses, that is how far back it stays accurate in its role as an s/r line. The real proof lies in trading. There you see your lines and what they do or don’t do to the price line. Also I do not recommend at all trading without knowing Technical Analysis well, so you at the novice level have to practice and practice. Some companies, like FXCM–a forex currency trading company, for example, offer demo accounts to practice completely free of charge–why spend hard-earned money to train or pass a course. You can learn the material you need from books, on-line videos, or my exclusive program here. To remind you this is the 2nd part of the Technical Analysis course I am giving over (support/resistance lines).
Please check out the lines I drew on the chart, they should help you see a little of what it is all about.
This is the way the Chart looks:
