Chartism is a graphic analysis. It is a study whose objective is to define price trends. By carrying out this analysis, the trader seeks to determine whether the value of a particular currency pair is rising or falling.
Chartism or chartist analysis
It allows to update chartist figures. The latter have the characteristic of indicating to the trader the trend at a time T. They then allow him to take a position accordingly: buy or sell? Invest more or sell out? Etc.
The principle of this analysis is based on the fact that price curves often reveal the same graphs. And to a design corresponds a particular trend within the market.
When engaging in chartist analysis, the investor therefore seeks to identify a particular purpose and take a position accordingly.
There are several chartist figures:
- head and shoulders,
- the symmetrical triangles,
- the rectangular triangles,
- bevels, etc.
It is therefore particularly important for the novice trader to be trained in the characteristics of these different figures. Experience is also another asset that allows the latter to be mastered.
It is not always easy to analyze chartist figures and adopt the appropriate position accordingly. For the novice trader, the risk of performing an erroneous analysis is always present and could prevent him from relying on the results of the chartist figures. However, there are some tips to help them reduce this risk.
Identify factors that are difficult to control
Too much pull back or objectives that are not achieved are factors that distort the results of the trader’s analysis. An investor with no market experience should wait for other signals to confirm his position.
Thus, in situations that could give rise to a pull back, instead of immediately taking a position in anticipation of the appearance of this figure, the trader should wait for it to come true. This prevents him from having to suffer significant losses due to excessive risk taking.
A trick in this context is to take a position just as the pull back is approaching the right. As a result, the risks are particularly reduced. To be able to make a profit in this situation, the trader must also ensure that his orders are executed in a timely manner. The identification of this moment and the provision of resources for efficient order execution are thus essential.
When in doubt, refrain from
Sometimes chartist figures give fuzzy data. If the trader feels that he does not have enough time to wait for further confirmation data, he is advised to refrain from taking a position. This is especially true if the market is highly volatile.
In the same context, the objectives communicated by the figures must be respected as much as possible. If these objectives are considered far too low by the investor, it is not advisable to take a position.
Patience for reliable results
Trading chartist figures requires patience: the more important the investor trades in time units, the more reliable the results. Thus, a trend analysis over a period of at least thirty minutes is strongly recommended.
Study the maximum number of chartist figures
The more experience the trader acquires, the faster he is able to make decisions, but especially to identify the different figures. Thus, even outside the figures of the market on which he trades, the investor has every interest in studying as many figures as possible to refine his analyses.
Chartist figures can materialize in different forms. This is why it is often difficult for a novice investor to analyze trends from them. For example, in Japanese candlestick frames, a novice may be lost and will need to familiarize himself with the above graphs. Nevertheless, by applying some tips, the risk of loss is reduced and trading with chartist figures becomes easier. A broker like OptionWeb provides many technical analysis tips to help beginners understand graphical data.