HanDollarian
Welcome to our guide on creating simple yet effective analyses for financial instruments. In this post, we will show you how to start with a line chart and gradually develop a meaningful analysis method to generate your own trading ideas.
The line chart displays only the closing prices of a financial instrument. This has the advantage of making it easier to visually identify sideways boxes.
These boxes are formed by clusters of closing prices and are important indicators of market movements.
Identify the areas where the closing prices are concentrated and mark these as sideways boxes.
These boxes help define the trading ranges. To refine the analysis, we categorize the boxes into three categories:
Candlestick charts can provide more detailed information, but they often result in creating more boxes than necessary.
Therefore, stick with the line chart initially to have a clearer view of the price movements.
After all the sideways boxes are marked, identify the liquidity points above and below the current range.
These points are simply the swing points or fractals and mark potential price targets.
By combining the identified ranges and liquidity points, we develop a coherent analysis method.
This method allows us to generate well-founded trading ideas by identifying potential support and resistance levels as well as price targets.