Technical analysis theory knowledge

Technical analysis studies past price and volume data to predict future price movements. This type of analysis focuses on the composition of charts and formulas to capture major and minor trends and identify buy/sell opportunities by estimating the length of market cycles. Depending on the time span you choose, you can use intraday (every 5 minutes, every 15 minutes, every hour) technical analysis or weekly or monthly technical analysis. 1. Dow Jones Theory

The oldest theory of technical analysis holds that prices reflect all available information, and that the knowledge available to participants (traders, analysts, portfolio managers, market strategists, and investors) has been translated into price action. Currency fluctuations caused by unpredictable events, such as God's will, will be included in the overall trend. Technical analysis aims to study price action in order to draw conclusions about future trends. The Dow Jones theory, developed primarily around stock market averages, holds that prices can be interpreted as including three amplitude types of ripples - dominant, auxiliary, and secondary. The relevant time period varies from less than three weeks to more than one year. The theory can also account for reverse patterns. Reverse mode is the normal phase experienced by the trend to slow down the movement speed, and such reverse mode grades are 33%, 50%, and 66%.

2. Fibonacci reversals

This is a widely used group of backlash phenomena based on numerical ratios produced by natural and man-made phenomena. This phenomenon is used to determine the magnitude of the rebound or backlash between the price and its underlying trend. The most important levels of backlash are 38.2%, 50% and 61.8%.

3. Elliott Wave Theory

Elliott scholars classify price trends in terms of fixed wavy patterns. These patterns can represent future indicators and reversals. Waves moving in the same direction as the trend are called push waves, while waves moving in the opposite direction are called correction waves. Elliott wave theory classifies push and correction waves into five and three main trends, respectively. These eight trends form a complete wave cycle. The time span can range from 15 minutes to decades. The challenging part of Elliott wave theory is that a wave cycle can be composed of eight sub-wave periods, which can be further divided into push and correction waves. Therefore, the key to Elliott wave theory is to be able to identify the environment in which a particular wave is located. Elliott waves also use Fibonacci reversals to predict the peaks and valleys of future wave cycles.