Identifying chart patterns is simply a system for predicting market trends and turns!
Hundreds of years of price charts have shown that prices tend to move in trends. Well, a trend is merely an indicator of an imbalance in the supply and demand. These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine possible future trend developments.
Chart Patterns
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Trend Lines
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Labels:
down trendline,
trend lines,
up trendline
Technical analysis is built on the assumption that prices trend. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Many of the principles applicable to support and resistance levels can be applied to trend lines as well. It is important that you understand all of the concepts presented in our Support and Resistance article before you continue.
The Interest Rate (Rollover)
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Labels:
cost of carry,
interest rate,
profit and losses,
rollover,
swap
Forex traders make money either buying low then selling high, or selling high then buying low. Profits and losses are determined by the opening and closing prices and by the pip value as you have studied in the previous section. However, profits and losses will also be affected by the different interest rates of the currency pair - by when the trades actually settle and how long the position is held.
Support and Resistance
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Market prices move in zig zag fashion. Peaks represent the price where more people sell than buy so market couldn't overcome this price. These prices are called resistance levels.
The troughs on the other hand represent the price where buying pressure was higher than selling. These troughs are called support levels.
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