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Simple Method for Creating Analyses for Financial Instruments

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.

Step 1: Start with the Line Chart

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.

Step 2: Marking Sideways Boxes

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:

  • Large boxes: Indicate long-term consolidations.
  • Medium boxes: Indicate medium-term consolidations.
  • Small boxes: Indicate short-term consolidations.

Step 3: Using Candlestick Charts

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.

Step 4: Marking Liquidity Points

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.

Step 5: Creating Trading Ideas

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.

This simple yet effective chart analysis method helps you better understand market structure and develop your own trading strategies. Try it out and adapt the method to your needs to trade more successfully.



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