MENTORING - Technical analysis - Introduction - Coggle Diagram
MENTORING - Technical analysis - Introduction
Technical analysis does not generate a trading opportunity. It only indicates a trade. Fundamentals only generate the necessity to buy or sell a stock.
However, for real money (and so, us), the opportunity is in finding where leveraged players are stuck to enter or exit. That is where we will grab our opportunity.
We will understand technicals to see where generally retailers/leveraged players come.
Hence, we will use technicals with an order flow mindset.
Technical analysis as a faculty has become so huge because of its open-endedness. We will use only those that are very simple. Why?
Because: (a) they are easy and cost effective for retailers to replicate; (b) easy and cost effective for leveraged large players to model; (c) easy and cost effective for non-leveraged players to find the prey.
Because the faculty is so large, we will pick up only those that are simple but effective.
We will approach technical analysis from the geometricial point of view. Why?
We divide the technical analysis tools into: (a) one point touch, (b) two point touch, and (c) three point touch.
Under one point touch, we will discuss: (a) trend line; (b) horizontal line; (c) vertical line; (d) moving averages.
Under two point touch, we will discuss: (a) rectangle; (b) parallel lines; (c) horizontal parallel lines; (d) triangle; (e) wedge
Under three point touch, we will discuss: (a) Fibonacci retracements; (b) Fibonacci extensions; (c) Andrew's Pitchfork
A trend line joins two market points at various times. It connects all those players who are expecting the market to not go out of that line.
By repeatedly expressing their view that the market will not cross a trend line, leveraged traders are creating an order flow around a trend line.
A trend line is a line that connects two market points. Once a trend line formed, more traders get aligned towards that trend line.
The more points a trend line connects, the more powerful a move (breakout or reversal) is going to be.
The larger the time frame, the powerful the move will be.
A horizontal line is similar to a trend line, but it is a more powerful form of a trend line. Why?
In a horizontal line, almost all traders are stuck at almost similar prices. That is why any rush to exit will crimp the order flow.
A vertical line is used to extrapolate the existing geometry. That means any trend line or horizontal line or any other two point touch geometry can be used with a vertical line to extrapolate the trading range.