Technical analysis studies past price and volume data to predict future price movements.
This type OF analysis focuses on the composition of charts and formulas to capture major and minor trends and identify buy/sell opportunities by estimating the length of the market cycle.
Depending on the time span you choose, you can use intraday (every 5 minutes, every 15 minutes, every hour) technical analysis, weekly or monthly technical analysis.
Basic theories of technical analysis :(1) dow Jones theory, the oldest theory of technical analysis, holds that prices comprehensively reflect all available information and that the knowledge available to participants (dealers, analysts, portfolio managers, market strategists, and investors) is already discounted in the act of marking.
Fluctuations caused by unpredictable events, such as divine intervention, will be included in the overall trend.
Technical analysis aims to study price behavior in order to draw conclusions about future directions.
The Dow Jones THEORY, developed mainly AROUND stock market AVERAGES, STATES THAT PRICES CAN be INTERPRETED AS WAVES consisting of THREE types of amplitude – dominant, secondary and secondary.
The correlation time periods ranged from less than 3 weeks to more than 1 year.
This theory can also explain the regression mode.
The RECOIL MODE IS THE NORMAL PHASE THROUGH WHICH THE TREND SLOWS DOWN, AND THE RECOIL MODE LEVELS ARE 33%, 50%, AND 66%.
(2) Fibonacci recognitions This is a widely used group of recognitions based on numerical ratios generated by natural and man-made phenomena.
This phenomenon is used to determine how far a price has rebounded or backtracked from its underlying trend.
The most important classes of gallop are 38.2%, 50% and 61.8%.
(3) Elliott Boelliott scholars classify the price trend in a fixed wave pattern.
These patterns can indicate future indicators and reversals.
Waves that move with the trend are called pushing waves, while waves that move against the trend are called correcting waves.
The Elliott wave theory divides the driving wave and the correcting wave into five and three main directions, respectively.
These eight directions make up a complete wave period.
Time spans can range from 15 minutes to decades.
The challenging PART OF ELLIOTT WAVE THEORY IS THAT ONE WAVE PERIOD CAN BE COMPOSED OF EIGHT SUB-WAVE PERIODS, which CAN BE FURTHER DIVIDED into PUSHING AND CORRECTING WAVES.
The key to Elliott waves, then, is being able to identify the environment in which a particular wave is located.
Eliot also uses Fibonacci regression to predict the peaks and troughs of future wave cycles.