The answers to these age-old questions of technical analysts are not only mathematical formulas, charts or graphs, but some of the concepts in the market, which can be applied to most of the major theories.
Known trader John Murphy, a recognized leader in the field of technical analysis of futures markets has developed a number of laws that can be successfully applied in the course of trade in the markets. Served as the basis for development of thirty years of experience, Mr. Murphy.
Simple and generalized rules are designed to simplify the process of working on the market souped his players, but they can be useful for more experienced marketers, entangled in a jungle of technical calculations.
The basic principle of the philosophy of J. Murphy is no need to look for the cause of changes in prices, and the importance of determining the direction of the market as a whole.
Rule One - Map of Trend.
Start by studying the long-term charts. The analysis should begin by looking at the movement of monthly and weekly charts for several years. Studying the behavior of prices in the large scale makes it possible to provide the most accurate objective picture of motion graphics in the long term.
Representation obtained from the analysis of the short-term, it is often a mistake, even if trade with minimal time scales. Achieve real success can only make deals in the direction of the intermediate or long-term trend.
Rule Two - follow the trend.
Market trends can be divided into three main types - intermediate, short term and long term. Next, determine which of the species you are going to trade and use it. Once you are sure that you have chosen the right direction, you should open position. To purchase shares at the bottom, if the trend is going up, and dispose of them at the top pull-down schedule.
At the intermediate trend is recommended daily and weekly charts of quotations. If you do deytrednigom, to use daily or intraday charts. Try to identify the main trend with long-term chart, but for a successful entry into a transaction using a short-term schedule.
Another one of these rules is based on tracking the resistance and support levels . Should acquire at or near support and sell exclusively at the level of resistance.
If the resistance line broken, the following pullback to support, she turns, so if support breaks, it begins to denote sale on these hills.
Murphy recommends measure correction percent. Often these changes up or down restore a portion of the prior trend. Correction of a certain trend can be measured as a percentage. One of the most common correction - 50% recovery trend, the most common minimum rate - 30% of the previous trend.
There is another simple but striking in its effectiveness reception - the trend line. Draw lines on the chart should be on the following principle:
1. Uptrend line passes between two successive minima.
2. Straight down the course held on the following two successive peaks.
The characteristic behavior of the price in both cases is to roll back to a line drawn, before resuming in the main direction of motion. Confirmed is the line to which the price touched at least three times. If the line is broken - so the general direction of the graph may change, and vice versa, a stable long-term time line indicates its stability and strength.
To effectively determine the optimal time to buy or sell is important not to lose sight of the moving averages. They can confirm the strength of the current trend or report about future changes. One of the most popular ways to detect signals is tracking point of intersection of two moving averages. With this method fixes the moment when one short line crosses the longer.
The most popular are the following combinations - 4 and 9, 9 and 18, and 5 and 20 day moving average. Provide excellent signals and crossing outside the 40-day moving average. The lines serve as indicators of trend following - the most effective, this method works in emerging markets.