Support and Resistance Basics
In this course, we introduce some basic technical analysis that helps a trader decide when to place a trade. We start off with how to determine reward/risk ratios prior to trade entry. We will discuss the concepts of support and resistance and what they mean to the trader. We will be introducing some simple charts which indicate the support and resistance levels of a particular currency pair. We will talk about entry and exit limit orders, as well as stop loss orders.
In our lesson on long and short trades, we will review the concepts of long and short positions, and how to use them to enter and exit a trade profitably.
This course will also include a further lesson on reading Japanese candlesticks and what the candle shapes and wicks on these charts can tell the Forex trader about market sentiment.
3.1 SR Basics Long and Short Trades
Technical analysis (TA) focuses on the likely low and high prices for a given period. They become our low-risk entry points and high-yield exit points.
Whether we enter at the anticipated low price or high price for a given currency pair depends on whether we want to take a “long” or a “short” position.
This lesson will help you understand what we mean when we talk about long or short positions or going short/going long.
3.2 SR Basics: Risk Reward Ratio in Forex
Technical Analysis indicators are the key to finding and executing high yield, low risk trades. Whether you’re using a daily, weekly or monthly chart or any other time frame, these indicators will show the likely reward-to-risk ratio of a trade.
In this lesson, we will show how choosing to take trades with an acceptable reward-to-risk ratio, i.e. a low risk/high reward trade, is conservative risk management, which is key to long-term trading success through long-term profitability.
3.3 SR Chart Patterns - Japanese Candles
Candlestick chart patterns reveal a wealth of information for the trader. A candle with a long body and little or no wick indicates that there is no indecision about price. During the period that this candle covers, traders would be mostly taking the same side, and prices would be heading in one direction.
Conversely, a short body and long wick on a candlestick chart shows that traders couldn’t make up their minds collectively. Price gyrated around its opening level and after lots of movement wound up virtually unchanged.
In this lesson, we will learn all about candlestick patterns and how whole sequences of candles can form shapes or patterns that suggest both what markets are feeling about a given currency pair, and where price is likely to go in the future.
3.4 SR Pivot Points
Pivot Points are objectively calculated price levels that are derived from previous prices. They are widely used in the expectancy that these levels will act as S/R.
Daily Pivot points are calculated from the previous day's prices, and are widely used by day traders.
Monthly and Yearly Pivot Points are calculated from the previous month and year's prices, and tend to be used by longer-term traders.
In this lesson, we will learn how Pivot Points are calculated, and how to use them.
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