We have explained the difference between fundamental and technical analysis. Technical analysis mainly involves looking at graphs. Again people think graphs are complicated and difficult to understand. Apart from 'candle stick charts' you will have seen these graphs at school or in any newspaper showing statistics. It does not matter how competent your maths is, graphs are directional they point up or down… this is the TREND.
In trading terms graphs are generally referred to as CHARTS.
1. Line chart
2. Bar chart
Line charts connect points in time to create a continuous line. Use line charts to get an overall trend or direction. Line charts should be viewed as DAILY, WEEKLY, MONTHLY or in some cases YEARLY. This will give you an idea of what the demand for a particular product has been over that period of time.
In this instance the TREND is down.
How would you use this chart to make money?
At every high point or peak of the line look for an opportunity to short (sell) the product.
Remember that line charts show the overall trend they may not be the best tool to get and exact entry point for what price you want to enter the trade. Like every other trader you will want to look at the information available in a more detailed format. This will be in the form of BAR and CANDLE STICK charts.