Tools For Chart Analysis

What are the main tools for chart analysis which a trader must be familiar with? Well, this is the main subject of this page. The right chart analysis is very essential for your success in forex. Read on to know the common tools for chart analysis, which are used by most successful traders.

 

Here are some of the popular forex chart analysis tools:

 

Andrews' Pitchfork

Built by Alan Andrews, Andrews' Pitchfork is a trend channel tool. It consists of three lines, with a median trend line in the middle with two parallel trend lines which are  at equal distance on either side. Based on reaction highs or lows moving from left to right on the chart, these lines are drawn by selecting three points. The outer trend lines indicate the potential support and resistance levels. A trend remains in place as long as the Pitchfork channel is seen to hold. Sometimes the median line needs a little adjustment to maintain a realistic slope. This tool for chart analysis also incorporates the use of trigger lines and the steepness of the Pitchfork channel is based on placing of the three drawing points.

Cycles

The next of the common tools for chart analysis is the cycle, which is an event. High or low prices repeating on a regular basis forms a cycle. These cycles can form in the economy, nature and the financial markets, covering the economic downturn, bottom, economic upturn and top. The cycles are looked upon as important tools for forex chart analysis. The cyclical forces, both long and short, force the price movement in the forex markets. To predict turning points, the price and time cycles are used. Cycles can also fade away and may even invert. It is better to use this tool for chart analysis in combination with other aspects of technical analysis.


Fibonacci Retracements

Fibonacci Retracements, as tools in chart analysis are ratios, for identifying possible reversal levels. These ratios are found in the Fibonacci sequence. The most well known Fibonacci Retracements are 61.8% and 38.2%. It is important to note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%. These tools for forex chart analysis are applied by chartists to define retracement levels and forecast the degree of a correction.

The Fibonacci retracements are often combined with other indicators and price patterns in chart analysis for developing an overall strategy.

Raff Regression Channel

Made by Gilbert Raff, the Raff Regression Channel among very popular tools for chart analysis and used by most traders. It is a linear regression with uniformly spaced trend lines above and below. The thickness of the channel depends on the high or low that is the farthest from the linear regression. As long as prices go up within this channel, the trend moves up. But6 when the price breaks below the channel extension, the uptrend sees a reverse. Similarly, the trend goes down as long as prices get lower within the channel and see a reverse when the price breaks above the channel extension.

We hope you find the above article on tools for chart analysis useful.

 
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