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The Sensible Guide to Forex: Safer, Smarter Ways to Survive and Prosper from the Start by Cliff Wachtel

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CHAPTER 3

Technical Analysis (TA) Basics

If you understood most of Chapter 2, you now have enough background so that we can begin to cover the analytical skills that will help you succeed in forex or any other kind of trading or investing. This chapter will cover:

  • What is technical analysis (TA).
  • Understanding the basics of candle charts and the simple goals and theory behind all those complex looking lines, charts, patterns, and more.
  • How to understand and use some of the most important of these, including various ways we identify support and resistance (s/r) and trends.
  • Examples to illustrate and apply what we've covered.

Those with some experience in TA from other kinds of trading will be glad to know that nearly everything they know applies to TA of forex markets. The charts, their common patterns, and their indicators work the same way. The main difference is the unique fundamentals driving these charts. These readers can feel free to just skim the following for anything they may have missed or want to review.

TA is typically defined as the study of price behavior, which is a reflection of mass trader behavior. Repeating chart patterns or persistent support or resistance levels don't form from thin air, but rather from the repetitious nature of how traders respond to past experience, each other, new information, and how each tries to anticipate how the other will react to that information. Trader behavior is based on unchanging human psychology. It's logical, then, that ...

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