Trading would be almost impossible without charts and technical analysis. Trading is all about anticipating and predicating rather than forecasting. Technical analysis is the best tool a trader can have. A picture is worth more than a thousand words.

Always remember, trend is your friend. Trading in the direction of the trend is the best trading strategy. Never try to trade against the trend. So determining the primary direction of the trend is highly importanct for you. Primary trend is the direction of the market that offers the least resistance forward making money. When you follow a primary trend in a bull market you look for strong stocks and in a bear market you look for stocks showing weaknesses. The most important thing that you should in a market is its primary trend. In order to determine the primary direction of the trend, you need to draw correct trendlines. This is an art that traders learn with experience. A wrong trendline means lost trades. You use the following tools to determine the primary trend! Knowing the primary trend and trading in its direction increases your chances of making money. So how do you find the primary trend and what tools you need to determine the primary trend?

Trendlines: You don’t have to worry much about how to correctly draw the trendline as most of the trading platforms have the function to help you draw the trendline. You can let the software draw the trendline for you or you can do it yourself. It is up to you. To correctly draw a rising trendline on the chart, start with the lowest low on the chart and connect it to the lowest low preceding the highest high in the chart without bothering about the prices between the two points. Knowing how to draw and use trendlines gives you an excellent start on any trade. Similarly to draw the down trendline, draw a line connecting the highest high on the chart to the highest high preceding the lowest low of the chart without passing through the prices between the two prices. Now why trendlines are important? Trendline show you the direction in which the markets are moving. If the trendline slopes up, it means that the market is in an uptrend. Prices are gradually going up. Now there might be minor trends in the primary trend but these minor trends are just like the ebb and flow of the waves in an ocean. Two more concepts that you need to learn is the key support and key resistance. Key support is the area above which the prices have held for sometimes. Key resistance is the area above which the prices have not been able to rise for sometimes. A market breaking above the key resistance or below the key support is a signals a new trend.

Moving Averages: Moving averages are the most basic but the most widely used analytical tools in trading. Before you understand what a moving average is first try to grasp the concept of support and resistance. Support level is the price where the prices stop falling and the buyers step in overcoming the selling pressure. A break in the support level is an indication that more weakness may be ahead. Moving averages are used to smooth out the market’s trend over a given period of time and serve as an important support and resistance levels.

Resistance level is the price where prices stop rising and the sellers overcome the buying pressure. A break above the resistance level is an indication that the market is going strong.

Oscillators: What is more important to know is the fact that oscillators produce useful mathematical data that can help you tell whether the market is overbought or oversold and whether the momentum of the primary trend in the market is still strong or there is a potential change in the primary trend ahead? Two important oscillators that you should be familiar with are RSI and MACD. Oscillators are graphic depictions of points derived from the mathematical formulas that are plotted below the price charts. Knowing these mathematical formulas is not important as a trader.

Bollinger Bands: Bollinger bands are calculated by plotting points one or more standard deviations above and below the 20-day moving average. However, you can calculate Bollinger Bands with any moving average. Bollinger bands are also known as volatility bands or envelopes. Bollinger bands give you visual evidence when the market has travelled too far in any one direction. After you identify the primary trend in the market, you should determine your trading timeframe. These timeframes are a sort of vague and can range from a few weeks to months. Short time frame for market timers is a few days to a few weeks. Long term time frame is something like six months.

Mr. Ahmad Hassam has done Masters from Harvard University. Try these cash printing trading/2009/09/strignanos-forex-signals/">Forex Signals from heaven. First trade on your trading/2009/10/forex-demo-account/">Forex Demo Account!

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