Technical Analysis is a method that is being used in the MetaTrader trading platform to predict the possible price movements in the future of certain stocks or security. The validity that supports the data derived from technical analysis is the concept of collective actions – the buy and sell of assets of all the market participants and that relevant data reflect on the traded security and actively assigns a fair market value of the asset.
Past price may indicate the future performance of an asset
One of the beliefs of technical traders is that the previous and current prices can help indicate the price action in the future. But technical analysis is not the mere basis of price movement in the market. There are also fundamental traders that use fundamental analysis in determining whether it is best to buy or sell in the market.
Charting using different time frames
Technical traders will try analyzing the price charts with the aim to predict the price movement. Two variables that need to be considered for technical analysis are the technical indicator that the trader will choose to use and the time frames that suit the trader’s trading activity. Here are the time frames that traders use;
- Daily chart
- 4-hour chart
- Hourly chart
- 15-minute chart
- 5-minute chart
The time frame that the trader picks is based on their personal trading style. For intra-day traders or those traders who open and close their positions within a day are mostly in favor of shorter time frames like 15-minute charts and 5-minute charts. For long-term traders, they are also aiming for longer time frames that can last overnight or for longer periods of time.
The price movements that happen in that 15-minute time frame are very important for intra-day traders as they are looking for the right opportunity to bring forth their profit through price fluctuations that happen throughout the day. But this isn’t always the case for long-term trading as the price movement on a weekly or daily chart may have a different significance on a longer time frame.
Technical Indicators Used in Technical Analysis
Moving Averages – is a technical indicator that is commonly used by technical analysts nowadays. There are a lot of trading strategies that use not just one but more moving averages to determine the movement of the market.
Pivot and Fibonacci Numbers – helps in identifying the support and resistance levels that are necessary when you enter or close a trade.
Fibonacci Retracements – is another well-known technical analysis tool that pinpoints significant trading opportunities for both entry and exit targets.
Fibonacci Extensions – determines the amount of price needed to extend whenever there is an overall uptrend that takes effect when trading in MetaTrader. As for Pivot and Fibonacci levels, they must be tracked continuously even if you don’t use them to supplement your trading strategy. Momentum Indicators – most technical indicators like moving averages are focused on determining the market’s direction. But this momentum indicator is focusing more on determining the market strength. Momentum indicators include Moving Average Convergence-Divergence (MACD) indicator, Stochastic Oscillator, Average Directional Movement Index (ADX), and Relative Strength Index (RSI).
