Classical analysis of financial markets

The financial result of a trader depends on the techniques and methods with which the trade is directly conducted. Each strategy has its own risk and return parameters, as well as specifics of determining the most optimal entry points in the market. However, a number of them have basic principles for selecting a deal and forecasting the future price movement.

These basic principles are incorporated into the classic understanding of financial asset analysis. We will consider today the key classical types of asset analysis.

I will identify the four main traditional types of financial tool analysis used by 90% of the fix api traders:

  • Support and resistance levels;
  • The price channel;
  • Elliott Wave Theory;
  • Patterns of financial markets.

1.  Support and Resistance Levels. The most popular type of trading, which consists of opening positions based on historical zones. These levels do not reflect a one-time testing of price zones, after which there was a corrective movement or impulse breakdown. To understand the principle of work, you can pay attention to the following image:

As you can see, the tool quotes tested the support level, after which they fought back and continued their growth. In turn, a similar quotation behavior was observed with the resistance level when the quotes reached the boundaries of this zone and subsequently turned back. It is in these zones that the most players post their pending purchase orders (in case of a support zone) or sell orders (in case of a resistance zone). I want also to note the fact that after the penetration of the support/resistance level, the past level can change its values. Thus, if the level of support is broken and the quotes go beyond the zone, it will act as a resistance level for future quotations.

2. The price channel, similarly to the resistance and support levels, displays an oblique range, in which the currency pair value moves in the fix apiforex market. Thus, these levels reflect a likely rebound from the inclined lines with a subsequent movement in the trend. This allows us to determine the further movement in the point of view of the market strength (impulse movement). There are technical indicators that display an inclined channel for the movement of the currency pair value, for example, Bollinger Bands and Donchian Channel.

3. Elliott’s wave theory already operates on the market for more than a hundred years and confirmed its right to be used by each fix api trader. The key message, according to this strategy, is the definition of a cycle in the market due to the wave counting. There are 5 waves, two of which are correlation, and three are related to the trend. As a rule, the peak of the second wave should not go beyond the ground of the first one, the target of the third wave is 161.8% of the first wave, the fourth should not go beyond the peak of the first wave and 50% of the third, while the fifth one has a target of 138.2% compared to the third. There is also a corrective formation ABC. According to Elliott, to understand in which phase the market currently is you need to analyze the last 150 candles. This strategy is written by a lot of classic traders and to learn more about it, I recommend you read more than a single book on this topic. Personally, I recommend you the following material –


4. Pattern trade is based on the regularities and technical formations, which are confirmed by the historical movement. This kind of pattern includes the trend continuation: a double bottom or top, figures of a flag and a pennant, a triangle and a “head – shoulders” formation. Also, there are various combinations of price bars, which can be taken as a signal for a trend reversal or the end of an impulse movement.

These classic strategies are used by almost every trader in his trading. And it is not strange, as they are confirmed by the time and the capital of other market participants. Moreover, they have a simple algorithm. However, not each of them can be turned into a trading robot that would trade using these strategies, rather than, for example, a scalping or arbitrage algorithm, which can be automated for the fix api forex market



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