Technical Analysis

The analysis of the market is mainly divided into fundamental and technical analysis. Although it is timing key to succeed in Margin trading, methods of technical analysis are also indispensable.
Technical analysis is a technique that aims to predict the future trend of market price, hold the market trend with price (including turnover and execute price), and studies market fluctuation with chart as the principal means. Next, we will briefly introduce some concepts about technical analysis and technical indicators uses.

Trend

To make a technical analysis, we have to know the concept of “trend” first.In a general sense, trend is the direction where the market goes. More concretely and exactly speaking, market usually won’t develop straightly towards one direction. Market movement is characterized by zigs and zags. There are obvious “peaks” and “troughs” like waves in market movement. The direction formed bythese peaks and troughs are called market trend.An uptrend is a series of peaks and troughs in an upward line; a downtrend is a series of peaks and troughs in a downward line; a horizontal trend is a series of peaks and troughs extending horizontally.

A very clear rising trend,also called bull market,an opportunity to buy.

A very clear falling trend,also called bear market, an opportunity to sell.

No clear rise or fall, hover around a certain range.

Moving Average

Moving average is a value obtained by dividing the sum of close price over a time period by this specified period. Moving average includessimple moving average , exponential moving average , Weighted Moving Average etc. which can be used independently to calculate other technical indicators. Moving average is the basis of chart analysis and one of the most famous analysis tools among all technical analysis indicators.

Granvile Rules

Granvile Rules is the most classic method of using moving average. The Rules emphasizes position relation between the moving average and actual prices and summarizes buy and sell signals respectively into four different patterns.

    Buy Signal

  • It is a buy signal when the moving average turns from long-term decline to level and shows a sign of moving upward to the right but the FX rate crosses the moving average from below.
  • It is a buy signal when the FX rate drops down below the moving average but the moving average will continue to move upwards in a short term, which indicates a temporary adjustment in the market.
  • It is a buy signal when the FX rate remains above the moving average, and despite drops, it rises again before falling below the upward moving average.
  • It is a buy signal when the FX rate fluctuates below the moving average and suddenly slumps far from the moving average, which is called bias, but the FX rate is likely to go upward towards the moving average.

    Sell Signal

  • It is a sell signal when the moving average gradually turns from an uptrend to level or decline, the FX rate breaks through the moving average from above, and the selling climax gains weight.
  • It’s better to sell when the FX rate breaks through the moving average from below but the moving average still keeps a downtrend.
  • It is a sell signal when the FX price bounces back but is still below the moving average while the moving average shows a downtrend from level.
  • It’s better to sell when the FX rate rises above the moving average and moves further and further from the moving average (FX rate continues to rise sharply), which indicates it’s profitable to buy positions in the recent period and there may be profit taking at any time.

Classification of technical analysis

Technical analysis is mainly classified into two types by method One is the trend-type analysis which determines the market fluctuation direction and follows the trend to take the advantage of an opportunity; the other is, oscillation–type analysis which guesses and estimates opportunities to buy and sell by analyzing strong/weak trends and extreme market conditions like overbought and oversold conditions. Generally speaking, the trend-type analysis is better for medium and long-term analysis, while the other type is more suitable for short-term prediction.

Trend type

Bollinger Bands - BOL Exponential Moving Average - EMA MACD
Parabolic - SAR Simple Moving Average - SMA Weighted Close - WC
Weighted Moving Average - WMA

Statistical type

Average True Range - ATR Chaikin Volatility - CV Detrended Price Oscillator - DPO
Fast Stochastic Oscillator - FSTO MOM Mass Index - MI
Price Oscillator - Price Rate of Change - ROC Relative Strength Index - RSI
Slow Stochastic Oscillator - SSTO Standard Deviation - StdDev Williams % R - W%R
Williams Accumulation Distribution - WAD
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