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Technical Analysis for Dummies

Technical analysis focuses on predicting the direction that prices are expected to move based on previous trends. It is a form of analysis that utilizes different charts to record data from market trends to show exactly how and when an expected change will or will not occur.

In terms of technical analysis there are two main types of chart patterns these consist of reversal chart and continuation charts.

Reversal– Reversal charts pertaining to technical analysis show that trends will often reverse themselves once the pattern is complete.

Continuations– Continuation chart patterns when it comes to technical analysis show that the trend will carry on even after the patterns as been completed.

Binary options trading is becoming a popular investing strategy that many are seeing huge returns with. When dealing with binary options one of the most useful tools brokers and investors can utilize is a binary options chart know as a candlestick chart.

Technical Analysis for Dummies

What Is A Candlestick Chart?

Candlestick incorporate chart and bar graphs to depict who is dominating the market. When deciphering these candlestick charts the buyers are typically referred to as bulls and the sellers are referred to as bears. It displays candles which consist of hollow or filled bars that are either red or green in color and wicks that vary in length with a top and bottom.

They visually provide you with easy to read trends in the market in terms of buying and selling, They can significantly help investor predict when the optimal times to buy or sell in the market should occur. Though they can be great tools to use an awareness and understanding that the market can at times vary and change drastically for outside factors that the graph can not compensate for.

How To Read A Candlestick Chart:

Reading a candlestick chart can be made easier once you understand how the components reflect the market. The bars represent hollow or filled rectangles, which indicate where the underlying asset closed in relation to its selling price. When the bar is longer it shows an increase of either buying or selling of the underlying asset that was a result of investors behavior. The size will reflect the price movement from open to close of an asset. When the bar is displayed as red when the underlying asset falls below its selling price at that specific time. Wren the bar is green it indicates a higher closing price for that specific time.

Wicks or shadows on the Candlestick chart is a line that will run from the top and bottom of the bar. Each wick represent what the highest and the lowest price points an asset reach at a specific time. When the wicks are long this represents a swift change in buying or selling behavior. Being able to properly and analyze a Candlestick chart can determine when the best time for investors to buy or sell in the market.

Why Should You Use Candlestick Charts In Binary Options:

Candlestick charts can help show reoccurring trends in the market and have been a reliable reference to predict certain trends. This can help you determine if you should buy, sell or wait to make any actions in the market. The charts will display common and recurring patterns that investor and brokers can use to their advantage in deciding when to buy or sell their binary options.

Some patterns for examples

One of the most common chart patterns is the head and shoulder pattern, This is a type of reversal chart with two variations; the head and shoulder top pattern and the inverse head and shoulder pattern. The head and shoulder top pattern will show when an upward trend is about to end and the inverse head and shoulder pattern will reveal when a reversal or downward trend is about to end. These patterns both consist of the same elements: two shoulders, a head, a neckline, a high and a low. These patterns will show the weaken of a trend in either an upward or downward deterioration.

head and shoulder pattern

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Engulfing Patterns will display small bars with longer wicks on the top and bottom of the bar. If this pattern in displayed during an upward trend it is a buyer’s market, if it is found along a downward trend it is a sellers’ market.

Engulfing Patterns

A doji pattern represents a cross like pattern which can indicate a change that could occur in the market.

doji pattern

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Morning stars will appear as short candles in the middle of two longer candles and suggests that the market is about to turn from a seller’s to a buyer’s market.

Morning stars

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A hammer pattern resembles a hammer with a long bottom wick with a square top and indicates that there was a major decrease in the asset after the open.

hammer pattern

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A spinning top pattern on a Candlestick chart is shown as having long wick on the top and the bottom which indicates an uncertain movement in the asset.

spinning top pattern

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The cup and handle pattern is a continuation chart that shows a pause in a trend. Though there is a pause in the trend it will eventually continue it is original upward movement.

The cup and handle pattern

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Another reversal chart pattern is the double tops and bottoms pattern. This is one of the most reliable patterns used to determine the reversal of a trend, The double tops and bottoms is commonly used to show long term trend reversals.

double tops and bottoms pattern

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A triangle pattern can be displayed as three different types; symmetrical ascending and descending triangle patterns. These are some of the most common patterns found in charts that pertain to technical analysis.

triangle pattern

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Flag and pennant patterns are typically short term continuations charts. The movement of these types of patterns tend to only last one or three weeks and signal a sharp movement followed by a sideways movement.

Flag and pennant patterns

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Wedge patterns will reveal movements over a long period of time that ranges from three to six months. These patterns can be found on either reversal or continuation charts.

Wedge patterns

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Gap patterns will indicated that a significant occurrence happened pertaining to the security. It will display a gap between two given trading periods. Gaps can be breakaways, runaways or exhaustion gaps.

Gap patterns

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