- There are several periods in analysis.
It seems fair to focus on evaluating the time series that refers to the time frame of a day when constructing a technical analysis model for short-term trading that requires sustaining a trading position for a few minutes to a few hours. Technical analysis, on the other hand, is based on the study of non-independent time series, because each short-term time series is, in essence, a component of a larger time series and hence inextricably related to it.
This implies that when we analyze and construct a model based on a day’s time horizon, we must go beyond it, concentrating on, for example, what has happened in the price and trend of the financial instrument we are analyzing in the previous three days, the last week, and potentially the last month.
We will get crucial information in this manner, allowing us to view the overall picture and better judge the short-term trend, as well as the critical moments of a trend change and the levels of support and resistance.
Finally, if you wish to trade for short periods of time, extend your analysis time by studying the chart of the financial product which you want to trade for a longer length of time. Then, moving to short-term trading, limiting the time frame to the starting time period.
2.The support and resistance lines are not narrow points of lines, but rather regions.
When evaluating support and resistance lines on the chart, think of them as broad regions of interest in selling or buying, so you may trade them. The crucial idea is to think of them as regions rather than as narrow lines indicating absolute individual pricing. Consider that other traders may have created trend lines similar to yours and will place sell and buy orders in a price range that differs from yours. So they may simply purchase in a support zone indicated by a price zone around your line, support, or resistance.
As a result, you must be flexible when constructing a support or resistance line when the price of a financial asset violates that line. Create confirmation filters to set a price margin and/or a time margin to avoid fake breaks in support and resistance levels.
True, if the support level is linked to a stop-loss order by specifying a price margin or a period to confirm the price breach of the support line, it is more likely to result in larger losses.
On the other side, you’ll prevent a pointless exit from a position that may turn out to be quite rewarding following a phony price break.
3. It is also a trading position not to take a stake in the market.
Many traders try to find a trade by examining a chart of a financial instrument, such as a currency or commodity, that they like and feel secure with, since they believe they have not yet found this trade.
They essentially push the trade by analyzing each chart for a favorable reward-risk ratio. The reality, on the other hand, is a little different. When pressing a deal, it is best not to trade and try to gain money since it is more probable that you will lose money.
Make it simple, if you don’t have a trading position, you need to understand why you don’t have one. If you understand why you don’t have a trade position, you actually do have a trading position.
To put it another way, if you don’t notice a strong possible deal that meets your criteria for identifying a trade, simply ignore it and move on until you do
4. Don’t take a one-dimensional strategy.
If the market conditions are met, each model can deliver exceptional results. When there is a market trend for a financial product, for example, technical analysis models that search for a trend in that product do exceedingly well. However, when there is no trend in the market for these goods, its performance is poor since it sends out erroneous buy or sells signals for that product. In this situation, a trader should have templates in his toolkit that work effectively when a market moves horizontally.
As a result, the failure of a model to operate well in particular market situations while it worked well in past periods does not render it useless; it just indicates the need to look for and apply other technical models that would suit other market conditions.
Finally, traders will need to employ several technical analysis models, each of which is dictated by market conditions.
They only need to have them and use them properly.
It is helpful to avoid failing when utilizing technical analysis tactics after the traders construct the framework of the above four points.