This pattern is called a trend and these trends have three distinct patterns. An Up trend with trend line drawn in UP TREND : Prices increasing DOWNTREND: Prices decreasing HOLDING OR FLAT LINE : Prices stagnant or small trading range. A trend line is basically a line drawn joining consecutive lows or highs in a trend pattern. A down trend with trend line drawn in Draw a line connecting the lowest points on a chart in an up trend. Draw a line connecting the highest points on a chart in a down trend.

Draw BOTH highs and lows for a holding pattern Holding pattern with BOTH lines drawn in Note Rising volumes on lead up to Breakout TOP Support Line When we draw a line joining all the lows of a price pattern together the line is called a Support Line. Support line These lines are a low point on the chart on which the price bounces off consistently when reached. Many traders elect to BUY when the price reaches this point.

It is our belief that the market likes to test Support lines more than once and we look for BUY signals after a second or third testing of this line. If a support line is broken then the current trend is said to be broken or in a Down Trend and the market will look for a lower price to set up a new support level.

TOP You will hear comments about support levels consistently on the chat rooms and in editorials. These levels ARE very powerful and SHOULD be monitored diligently when reached. Resistance lines When we draw a line joining all the tops of a price pattern together the line is called a Resistance Line. It is basically the exact opposite of the support, it is a series of highs on a chart where the market continually rejects the price thus not allowing it to go any higher.

Resistance line is drawn in RED. Support in Green Many traders elect to SELL when the price reaches this point. It is our belief that the market likes to test Resistance lines more than once and we look for SELL signals after a second or third testing of this line. The same applies for resistance in that it is a powerful level and one SHOULD think seriously about taking profit at this level.

Some traders like to sell small parcels to average out their price paid and leave the rest in hope of greater gains. TOP What to look for! Breakouts We have now established what are trend lines and how to draw them.

When one of theses lines is breached is called a Breakout. If a breakout occurs on a Resistance line many Trader's will class this as BUY signal and act accordingly. If a breakout occurs on a Support line many Traders will class it as a SELL signal an act accordingly. Please note how the OLD Support line NOW becomes the NEW Resistance line Resistance Broken Resistance Broken Note Rising Volumes on Breakout TOP Resistance Broken Support Broken From time to time there will be FALSE signals given.

It is at this point we need to add other indicators to help with our Analysis. by MPFX You should now have a basic understanding of Trend Lines and their workings from our first chapter.

In this chapter we will discuss some of the patterns that form on the charts that help give a further indication of an impending Trend Reversal. Once again some of the patterns about to be discussed are very powerful and SHOULD be respected! It is usually formed at the end of an upward trend or market rally and acts as a SELL signal. The Left Shoulder - The market looks to test higher price levels. Increasing Volumes. Followed by retracement to neckline. The Head Market again looks to test higher ground and succeeds with setting a higher price that was set by the Left Shoulder.

Large Volumes Followed by retracement to neckline. The Right Shoulder - Once again the market looks to test higher ground but this time fails to achieve the high price set by Head.

Reducing Volumes. Again followed by retracement to neckline only this time there is a good chance of the Neckline being violated and the market MAY look to test Lower ground. The Neckline Is a line that is drawn connecting consecutive lows. It is a line where the price bounces off and refuses to go below. It is basically the same as a support line Most traders who are familiar with this pattern would try to liquidate at the top of the Head or as it started to retrace towards the Neckline.

If you are still holding a stock during the Right Shoulder stage it may be your last chance to liquidate before the price tests lower ground. I advise that you look to liquidate at the top of the Right Shoulder.

It is made up of the same four components only this time they are acting in reverse and thus give a Buy signal. The Left Shoulder The market looks to test lower price levels. Decreasing Volumes. Followed by test of Neckline. The Head - Market again looks to test lower ground and succeeds with setting a higher price that was set by the Left Shoulder. Steady to slightly increasing Volumes. The Right Shoulder - Once again the market looks to test lower ground but this time fails to achieve the low price set by Head.

Again followed by test of the neckline only this time there is a good chance of the Neckline being violated and the market MAY look to test Higher ground. Please note volumes rising. The Neckline - Is a line that is drawn connecting consecutive Highs. It is a line where the price bounces off and refuses any Higher.

It is basically the same as a Resistance Line Again most traders who are familiar with this pattern would try to Buy at the bottom of the head but it is a safer way to trade if you wait till confirmation that the Right Shoulder has formed and is looking to test the Neckline once again.

Where you decide to take your position is a matter of personal preference and risk adversity. TOP Double Tops This is another powerful pattern that MAY indicate that the market is looking to test Lower levels. It occurs at the end of a upward trend or market rally. Double tops basically tell us that the market has tested a price level on two occasions and on both times refused to go higher. They can also come in the form of triple and quadruple tops.

Volumes on the second top should be lower than the first top. If you hold a stock that exhibits a double top be ready to liquidate as there is a good chance the market will go lower. TIP Bar and Candle Charts will give you a better example of double tops than line charts. Examples of Double and Triple Tops: TOP Examples of Double Bottoms : Double Bottoms Double bottoms are identical to double tops except they work in the opposite way and thus create a Buy signal.

Double bottoms basically tell us that the market has tested a price level on two occasions and on both times refused to go Lower. They can also come in the form of triple and quadruple bottoms. Volumes on the second bottom should be Greater than the first bottom.

Double bottoms can give an excellent Buy signal and most Technical Traders would act on such a sign. It can also be called a saucer or distribution curve and is seen at the end of an upward trend. It shows the market is running out of steam and cannot achieve new highs.

Volumes will start to reduce as the price reaches it's peak and increase as the price starts to fall. Most experienced Traders would note this and exit their position. TOP Some example of Rounded Tops: Rounded Bottoms Below are examples of rounded bottoms and cups: This formation has the same characteristics as a rounded top only this time it works in the opposite way and creates a BUY signal.

Rounded bottoms are sometimes called Saucers or the Accumulation Period. All of these patterns indicate that the downward trend is running out of steam and the market is looking to test higher ground once again. Most experienced traders would be looking to position themselves in this accumulation period, it is called the accumulation stage as that is exactly what is happening, traders are accumulating shares.

A further extension of the rounded bottom is a formation called a Cup. It is basically a completed rounded bottom with a smaller rounded bottom formed on the right hand side thus giving the appearance of a handle for the cup. Volume should be on the increase as the bottom starts to climb upward.

There should be even larger volumes again during the Handle stage. The Handle is maybe our last chance to take a position before the market tests higher ground. TOP Triangles Triangles and wedges are probably the most frequently occurring pattern to form on the charts and can give a possible early indication of a trend reversal.

As they occur so frequently they are not as reliable as some patterns previously discussed but are still a very useful indicator for the Technical Trader. Drawing Triangles onto charts is basically just drawing BOTH support and resistance lines at the same time.

They can be found nearly anywhere on a chart. Sometimes an entire up trend or downtrend may be made up of lots of little triangles. The two main types of triangles that can be found are: Symmetrical Triangles and Right Angled Triangles: Symmetrical Triangles - These occur when the price is locked into a reducing trading range.

Both support and resistance lines meet in a point. The lines are said to be in Convergence. Volumes slowly reduce as the price nears the point of the triangle and then on breakout surge considerably. Below are examples of triangles : As Traders we are looking for this breakout and would either buy or sell according to the direction of the breakout.

Please remember that false are common with this type of pattern. Right Angled Triangles - Are similar to symmetrical triangle but instead one of the lines drawn will either have a flat top or flat bottom and is drawn near perfectly horizontal.

These triangles are probably more accurate than all others and may also indicate which way the price could break. Again extreme caution is needed when using triangles as they DO generate false signals. Flags Pennants Wedges Flags, pennants and wedges occur on both up and down trends and indicate the market is reassessing the share price or more simply taking a breather.

They are more often than not formed at the halfway stage of a trend. They are drawn onto charts by drawing both support and resistance lines simultaneously. Once drawn they should take on the appearance as their names imply.

A Flag looks like a Flag A basic rule to follow is ' If a Flag, Pennant or Wedge forms in an up or down trend, the trend USUALLY continues on the same path'. An up trend continues Up.

Below are some examples : If holding a stock and one of these patterns forms on the chart it is a signal for caution and a breach of either the support or resistance should be acted upon As you can see Wedges and Pennants are very similar in appearance but in essence as Traders we are only interested in which way they will break as opposed to what to call them.

FOOTNOTE: Be Warned.. ALL of the above mentioned in this chapter CAN and WILL give False buy and sell signals. It is at the Traders discretion whether to act on any of these signals. It is my recommendation that diligent monitoring should be applied if you are holding a stock that exhibits ANY of these patterns mentioned. TOP BY MPFX When looking at a chart we have the option to view the price formations in four main styles, these are: Line, Bar, Candle and Point and Figure.

Volumes on the second top should be lower than the first top. If you hold a stock that exhibits a double top be ready to liquidate as there is a good chance the market will go lower. TIP Bar and Candle Charts will give you a better example of double tops than line charts. Examples of Double and Triple Tops: TOP Examples of Double Bottoms : Double Bottoms Double bottoms are identical to double tops except they work in the opposite way and thus create a Buy signal.

Double bottoms basically tell us that the market has tested a price level on two occasions and on both times refused to go Lower. They can also come in the form of triple and quadruple bottoms. Volumes on the second bottom should be Greater than the first bottom.

Double bottoms can give an excellent Buy signal and most Technical Traders would act on such a sign. It can also be called a saucer or distribution curve and is seen at the end of an upward trend. It shows the market is running out of steam and cannot achieve new highs. Volumes will start to reduce as the price reaches it's peak and increase as the price starts to fall.

Most experienced Traders would note this and exit their position. TOP Some example of Rounded Tops: Rounded Bottoms Below are examples of rounded bottoms and cups: This formation has the same characteristics as a rounded top only this time it works in the opposite way and creates a BUY signal.

Rounded bottoms are sometimes called Saucers or the Accumulation Period. All of these patterns indicate that the downward trend is running out of steam and the market is looking to test higher ground once again.

Most experienced traders would be looking to position themselves in this accumulation period, it is called the accumulation stage as that is exactly what is happening, traders are accumulating shares.

A further extension of the rounded bottom is a formation called a Cup. It is basically a completed rounded bottom with a smaller rounded bottom formed on the right hand side thus giving the appearance of a handle for the cup. Volume should be on the increase as the bottom starts to climb upward. There should be even larger volumes again during the Handle stage. The Handle is maybe our last chance to take a position before the market tests higher ground. TOP Triangles Triangles and wedges are probably the most frequently occurring pattern to form on the charts and can give a possible early indication of a trend reversal.

As they occur so frequently they are not as reliable as some patterns previously discussed but are still a very useful indicator for the Technical Trader. Drawing Triangles onto charts is basically just drawing BOTH support and resistance lines at the same time.

They can be found nearly anywhere on a chart. Sometimes an entire up trend or downtrend may be made up of lots of little triangles. The two main types of triangles that can be found are: Symmetrical Triangles and Right Angled Triangles: Symmetrical Triangles - These occur when the price is locked into a reducing trading range. Both support and resistance lines meet in a point. The lines are said to be in Convergence. Volumes slowly reduce as the price nears the point of the triangle and then on breakout surge considerably.

Below are examples of triangles : As Traders we are looking for this breakout and would either buy or sell according to the direction of the breakout. Please remember that false are common with this type of pattern. Right Angled Triangles - Are similar to symmetrical triangle but instead one of the lines drawn will either have a flat top or flat bottom and is drawn near perfectly horizontal.

These triangles are probably more accurate than all others and may also indicate which way the price could break. Again extreme caution is needed when using triangles as they DO generate false signals. Flags Pennants Wedges Flags, pennants and wedges occur on both up and down trends and indicate the market is reassessing the share price or more simply taking a breather. They are more often than not formed at the halfway stage of a trend.

They are drawn onto charts by drawing both support and resistance lines simultaneously. Once drawn they should take on the appearance as their names imply. A Flag looks like a Flag A basic rule to follow is ' If a Flag, Pennant or Wedge forms in an up or down trend, the trend USUALLY continues on the same path'. An up trend continues Up. Below are some examples : If holding a stock and one of these patterns forms on the chart it is a signal for caution and a breach of either the support or resistance should be acted upon As you can see Wedges and Pennants are very similar in appearance but in essence as Traders we are only interested in which way they will break as opposed to what to call them.

FOOTNOTE: Be Warned.. ALL of the above mentioned in this chapter CAN and WILL give False buy and sell signals. It is at the Traders discretion whether to act on any of these signals.

It is my recommendation that diligent monitoring should be applied if you are holding a stock that exhibits ANY of these patterns mentioned. TOP BY MPFX When looking at a chart we have the option to view the price formations in four main styles, these are: Line, Bar, Candle and Point and Figure. All of these have their strengths and weaknesses and which style you choose will be a matter of personal preference. I personally elect to use three of the four types with point and figure the one I never use.

The line chart is the one most of us would have seen many times before and is usually plotted using closing price data. This chart is good for visualizing the overall trend of a stock and on some charting programs it will allow you to see more data over a longer time span.

It's use is limited as it is basically what I call a one dimensional chart as it uses only one form of data. Good for glancing, but not for analyzing. TOP Bar charts are probably the most widely used by traders and not only give us the closing price but also the high, low and opening prices.

As traders we need to know as much as possible about a stock and its movements and these bars are the perfect tool for the job. With a single glance at one of these bars we can get a feel for how investors traded this stock for the day and their general sentiment towards it. Small bars or bodies as they are Technically called are a sign the market maybe consolidating its position or thinking about its nest move. Long bodies could indicate the market is again on the move and looking to test new levels.

Some charting packages will only show the close on the bar, many traders elect to use this style with great success. Some say the opening price does not give a true indication of market sentiment and choose to ignore it. There is a marked difference when drawing trend lines on a line chart compared to a bar chart.

With a bar chart you get the entire trading range and a trend line can be drawn using these ranges as opposed to only using closing price data on a line chart.

To make this more clear please refer to diagrams opposite. These two charts are identical except one is a line chart and one is a bar. The trend lines drawn in are the same for both charts based on the bar chart only.

In the circled areas you can see the clear difference between the two. With a bar chart we are drawing trend line based on trading ranges rather than end of day closing prices. By doing this we are allowing ourselves a better chance of gaining a lower entry price and a higher exit level. We also increase the range in which the stock may trade thus allowing greater profit margins.

TOP Candle stick charting was developed by the Japanese several centuries ago and has undergone a resurgence in popularity in recent times. This form of chart is by far my personal favorite and I usually use it exclusively. Although more complex to understand, once mastered, candle charts can give you the best overall view of market sentiment. In this section I will give you a brief summary of candles but the purchase of a book dedicated to candle charting should be a must for anyone serious about developing their charting skills.

Candles are similar to bar charts in that they show all four data components open , close, high and low but that is where the similarities end. Candle charts use rectangular boxes that join the open and closing prices together, and use vertical thinner lines to define the trading range. The boxes are called the ' Real Body ' and the thin trading range line are called the ' wicks or shadow If the closing price is higher than the opening price the body will be white, if the closing price is lower than the opening price the body will be black.

Opposite is a basic list of common candle stick formations. large trading range. small trading range. Market tested higher levels but failed to close any higher than open. Market tested lower levels but failed to close lower than open. Also known as a ' Hammer ". The appearance of a hammer at the top of a trend could suggest lower prices may follow.

Bearish sign. Also known as Hammer. The appearance of a hammer at the bottom of a trend could suggest higher prices may follow. Bullish sign. Bullish at bottom. Bearish at top. Please note that Hammers are also referred to as ' umbrella lines ". They represent small trading ranges and are important in some candle chart patterns.

Again where they occur is of the up most importance. Opposite are 3 examples of Hammers. The bottom two are bullish while the top one is Bearish.

The appearance of Dark clouds is not a good sign. It is formed with a white real body followed by a Larger black real body that closed lower than the previous days close. As mentioned at the start of this chapter Candle stick charting is so involved that the purchase of a book solely dedicated to this subject should be must for any serious trader.

I have only scratched the surface of this invaluable method of charting in this chapter. Moving Averages have been around for many centuries and helps the trader to try and eliminate some of the volatility that is associated with stock prices.

There are three main types of moving averages: Simple, Exponential and Weighted. This suits my trading style and all examples shown here are based on this.

I suggest that you experiment with all 3 on the same stock to see how all three behave just that little bit differently. Moving averages are basically the share price smoothed out over a set time frame. They are calculated by adding all the closing prices together for a set number of days and then dividing this total by that set number of days.

As new data becomes available the earliest entry is replaced with the latest entry thus keeping our 20 day total intact. The longer the time frame the less false signals. As most charting packages automatically construct all three types of moving averages I believe that time is better spent here explaining how to trade using them as opposed to their how they are mathematical made up. Reading this book will help you get the most recent information on Technical Analysis In Forex Trading which will keep you aptly informed.

Technical Analysis In Forex Trading is a book you must read if you have not yet done so. You will get the most recent information about Technical Analysis In Forex Trading so that your knowledge will be up-to-date. For many traders, price and the price chart itself are the beginning and the end of technical analysis. All they consider is the price and nothing else. This approach was first developed by the founding father of technical analysis, Charles Dow, more than a century ago, and then further developed and codified by Richard Wyckoff into his three laws, and what I now call Volume Price Analysis.

In this book you will discover how to apply volume price analysis to your own forex trading, regardless of whether you are a scalper or longer term swing or trend trader. Through over worked chart examples, with annotations, you will learn how to read the market for yourself, and anticipate where the market is going next. No longer will you be caught off guard, or trapped into weak positions.

And in addition you can apply this powerful methodology directly to your trading, or it can be integrated and blended into existing trading tactics and strategies.

All that is required is a chart with volume and price. Volume price analysis answers the one question all traders want an answer to: Where is the market heading next? Read less. Product details Publisher : CreateSpace Independent Publishing Platform January 15, Language : English Paperback : pages ISBN : ISBN : Item Weight : 1.

Editorial Reviews About the Author Anna Coulling is a full time trader, best selling author and market analyst. Her trading career began in futures almost twenty years ago, since when she has traded virtually every market, and every instrument. Volume price analysis has been the foundation of her trading and investing success, and is the technical element of her unique three dimensional approach to trading.

Fundamental and related market analysis then complete the method. This powerful approach has given her a deep and detailed knowledge of the forces that drive the financial markets, which is then reflected in the underlying market sentiment.

edu no longer supports Internet Explorer. To browse Academia. edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. Fundamental analysis is a way of looking at the market by analyzing economic, social, and political forces that affects the supply and demand of an asset.

If you think about it, this makes a whole lot of sense! Just like in your Economics class, it is supply and demand that determines price. Log in with Facebook Log in with Google. Remember me on this computer. Enter the email address you signed up with and we'll email you a reset link. Need an account? Click here to sign up. Download Free PDF. Forex Fundamental analysis. Darren Chia. Continue Reading Download Free PDF.

Content Page no. Fundamental Analysis. Interest Rates Long-term Market Movers. News and Market Data. Market Reaction. Market Sentiment. Commitment of Traders Report. Trading the News. Carry Trade. The US Dollar Index.

Inter-market Correlations. Gold Correlation. Bonds Correlation. Bond Spreads. Bond Markets, Fixed Income Securities, and the Forex Market. Global Equity Markets to Trade FX. The Relationship Between Stocks and Forex.

Correlation Between Stocks and Currencies. Inter-market Analysis Cheat Sheet. Country Profiles and Major Economies. United States of America. Euro Zone.

United Kingdom. New Zealand. Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all the factors that affect supply and demand. In other words, you have to look at different factors to determine whose economy is rockin' like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of why and how certain events like an increase in unemployment affect a country's economy, and ultimately, the level of demand for its currency.

The idea behind this type of analysis is that if a country's current or future economic outlook is good, their currency should strengthen. The better shape a country's economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country's currency to obtain those assets. In a nutshell, this is what fundamental analysis is: For example, let's say that the U.

dollar has been gaining strength because the U. economy is improving. As the economy gets better, raising interest rates may be needed to control growth and inflation. Higher interest rates make dollar-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first.

As a result, the value of the dollar will increase. Later on in the course, you will learn which economic data drives currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You'll be spitting out interest rates like baseball statistics.

But that's for another lesson for another time. For now, just know that the fundamental analysis is a way of analyzing a currency through the strength or weakness of that country's economy.

It's going to be awesome, we promise! Fundamental Analysis We already touched upon fundamental analysis in Kindergarten. Now it's time to dig a little deeper! Lessons in Fundamental Analysis 1. What is Fundamental Analysis? If you like analyzing social, economic, and political factors that affect supply and demand, fundamental analysis is for you!

Interest Rates Interest rates changes are one of the biggest fundamental catalyts out there. Heck, you could even say that they make the forex world go 'round! The Who's Who of the Central Bank Central banks are like puppeteers. They have full control over monetary policies and their words can move markets in an instant. Long-term Market Movers As with personal relationships, it's important to consider long-term factors in trading. They may hold the key to your happiness!

News and Market Data In forex trading, you've got to keep up to date with the latest news and market data to stay alive. Be in the know by checking out these market info tools! Market Reaction A super duper important report just came out Now what?! Along your travels, you've undoubtedly come across Gulliver, Frodo, and the topic of fundamental analysis. Wait a minute We've already given you a teaser about fundamental analysis during Kindergarten!

Now let's get to the nitty-gritty! What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals! That was easy, wasn't it? There's really more to it than that. Soooo much more. Whenever you hear people mention fundamentals, they're really talking about the economic fundamentals of a currency's host country or economy.

Economic fundamentals cover a vast collection of information - whether in the form of economic, political or environmental reports, data, announcements or events. Fundamental analysis is the use and study of these factors to forecast future price movements of currencies. It is the study of what's going on in the world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements such as the growth of the economy, inflation, unemployment affect whatever we're trading.

Fundamental Data and Its Many Forms In particular, fundamental analysis provides insight into how price action "should" or may react to a certain economic event.

Fundamental data takes shape in many different forms. It can appear as a report released by the Fed on U. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy. The release of this data to the public often changes the economic landscape or better yet, the economic mindset , creating a reaction from investors and speculators.

There are even instances when no specific report has been released, but the anticipation of such a report happening is another example of fundamentals. Speculations of interest rate hikes can be "priced in" hours or even days before the actual interest rate statement.

In fact, currency pairs have been known to sometimes move pips just moments before major economic news, making for a profitable time to trade for the brave. That's why many traders are often on their toes prior to certain economic releases and you should be too! Generally, economic indicators make up a large portion of data used in fundamental analysis.

Here's something interesting: When the euro falls, which way does the U. Consensus vs. Flags Pennants Wedges Flags, pennants and wedges occur on both up and down trends and indicate the market is reassessing the share price or more simply taking a breather. With the Reserve Bank of Australia touting one of the higher interest rates among the major currencies currently at 4. This allows you to gain a better understanding of how live trading works before you take any big financial risks in the market. At the end of the article, you will get a chart patterns PDF download link for backtesting purposes.

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