The community of stock market analysts uses tools with agreed methods and strategies to study the behaviour of shares, currencies, etc. One of the most popular tools is the technical analysis, which has different levels of complexity in the way of providing the information collected, which makes it possible for both beginners and experts to enter into the use of this type of study. The different types of information are visible in geometric figures, which, in different colours and shapes, provides different types of data. Therefore, the knowledge of the main of these figures is essential for a good use of the tool, and together with the broker FXGM ZA today we tell you more information.
- Price channel, through this figure the continuation of the trend is registered, which is delimited by two lines: an upper one, which marks the maximum value prices, while the lower one, registers the minimum prices of the values. The shapes that these curves can take are upward (ascending), downward (descending), or not sloping (rectangular).
Investors use this information – explains FXGM ZA – because when the curve is upward, it indicates that stocks are in a bullish momentum, so traders will want to buy when prices reach the support trend line, and look for economic benefits when it reaches the resistance line.
- Symmetrical triangle is another trend continuation figure. This figure is structured with at least two highs, one lower than gold, and two lows, one higher than the other. During the course of the trading day, these lines appear to join until they finally do, and when they converge, they form a triangle.
The attraction of this figure – explained by the technical analysis specialists at FXGM ZA – is that it has measurement and timing effects. When the figure is completed, price and volume decline before they react sharply and go beyond the boundaries of the triangle. A breakout can occur on either side of the triangle, if the triangle is bullish, the breakout will occur in the same direction as the previous uptrend. On the other hand, if the symmetrical triangle is bearish, the breakout occurs in the same direction as the previous downtrend.
- Flags and pennants are two consolidation figures. They usually occur in the middle of a large price movement and simply represent brief pauses in a market with a lot of volume.
It is worth noting – they point out at broker FXGM ZA – that they are among the most reliable figures, and rarely produce a trend reversal. Both figures mark a small consolidation of the movement of a stock price.
- Wedges are also triangular figures, where the two lines have the same direction and have a clear particularity. The ascending wedge (with the two upward lines) has bearish implications and the descending wedge (with the two downward lines) has bullish implications.
These are just some of the most common figures provided by technical analysis, and known individually and jointly, enabling the investor – FXGM ZA concludes – to have very specific and clear information to develop investment strategies and also to anticipate trends, which in themselves are difficult to anticipate, with more knowledge of the economic scenario.