You’ve heard the phrase that in life history tends to repeat itself. For technical analysts, this principle justifies their attitude to the financial markets. Technical analysis involves the use of graphs and charts to examine past market action and so predict future trends.
3 types of charts
Reading the graphs
You can easily tell from a graph whether the asset movement is:
Bearish - see the downwards trend on the line graph above
Ranging - see the fairly horizontal line across the bar chart above
Bullish - see the upwards trend on the Japanese Candlesticks above
Time range of graphs
Graphs are available with different time scales. It is important to study the right one, relative to the time scale of the trade you will be placing, in order to gain a reasonable understanding of the past asset patterns. As a general rule, for intra-day trading, 1 hour charts give a good basic overview of the asset action. This means that each bar or Candlestick will represent an hour of trading. If you wish to chart a long-term pattern, perhaps ahead of trading on the One Touch platform, consider using 4 hour charts. For shorter binary options trades with nearer expiry times, it will probably be best to use a graph which displays the asset value at every 15 or 30 minutes.
Support and Resistance
Technical analysts often refer to support and resistance levels. These are levels which can be marked out on graphs and used to predict future changes in direction.