If we talk about trading education, the situation is completely different now as compared to 15 years ago. Back then, there was little information about trading, and it was impossible to open an account with very little money. Now, you have tons of information and the ability to trade with limited capital, but yet, most of the information available is wrong or incomplete.
Speaking of technical analysis, which today’s topic, most of the retail traders are being misled, which then transpires into heavy losses and painful mistakes. Some key technical analysis principles must be well-understood from the very start, in order to avoid being trapped like most of the beginners.
How to view support/resistance levels
The mistake most of the traders do, when dealing with support or resistance levels, is viewing them as a “simple line in the sand”. Goichi Hosada, the creator of the Ichimoku Kinko Hyo, a popular technical analysis method especially in the Asian markets, highlighted how important it is to treat them as areas or zones.
Most of the traders will view a price going above/below a resistance/support as a breakout opportunity, when in fact, that’s not the case most of the time. No matter whether you choose the Clicktrades CFD trading offer, Oanda, forex.com, or any other broker, it is very important that you understand how to deal with support and resistance levels.
Impulsive and corrective moves
We could say that market performance is basically an endless stream of impulsive and corrective moves. As a trader, you’ll want, most of the time, to trade in the direction of the dominant order flow, which means you want to anticipate impulsive moves.
Impulsive moves could be described by the particular sections of the chart when the price is heading strongly in a particular direction. Candles (if you use candlestick charts) are big in size and cover a lot of ground. In the case of corrective moves, candles are mixed, and the ground covered is less.
More often than not, impulsive as well as corrective moves tend to end around support or resistance levels. Both above-mentioned principles are intertwined and your goal as a trader will be to set up a clear set of rules that will help you to anticipate market moves before they happen.
Although you won’t be able to anticipate the market every day, understand these key principles will definitely put you ahead of other people who are struggling to trade the markets.