Charting price data is very important. Charts shows you the history of the currencies behaviour over time and therefore provides much more information than simply looking at a single quote of the present rate. Adding technical indicators to the charts allows you to view the price data in an alternative manner which yields even more information. Therefore, it is important to know at least the basics of technical analysis and the information you can gain from it.
There is a multitude of information available about technical analysis on the Internet. Therefore, it is not necessary to rush out and buy a number of books on the subject. On this web site we seek to provide an introduction to the subject only to enable readers to research the subject themselves more fully.
What is technical analysis?
Technical analysis comprises a number of different techniques:
* Price data can be represented as lines, candles, bars or point and figure (P&F) charts. Each representation yields unique information about the data.
* Trend, channel, Fibonacci, Gann and other lines can be plotted on the charts to delineate and clarify price trends, ranges or other patterns.
* Technical indicators can be calculated and plotted on or under the charts.
Trend Lines
Trend lines are drawn by joining the lows (support line) or the peaks (resistance line) of the price data. This helps to clarify existing trends and produces clear exit criteria as the trend has ended when the price breaks through a resistance or support line. The problem with trend lines is that you are only able to draw them once a trend is well established, by which time it is too late to enter a trade. Also, trend lines are very subjective, no two people will agree on exactly where they should be drawn. This allows emotion to creap into your trading.
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