Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 4 - Technical Analysis
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 5 - Psychology
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 6 - Risk and Money Management
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TREND LINES AND CHARTING

When a trader looks at a price chart of a stock it can appear to be completely random movements. This is often true and, yet, within those price movements are patterns. Chart patterns are geometric shapes found in the price data that can help a trader understand the price action, as well make predictions about where the price is likely to go.

The idea of a trend is perhaps the most important concept in technical analysis. The meaning in finance is not very different from the general definition of the term – a trend is really nothing more than the general direction in which a security or market is headed.

Trend Lines create support and resistance areas of interest on both long and short-term charts. The longer time value of the trend line, the stronger it is. Trend lines also help traders determine whether markets are up or down trending, or are moving sideways.

The definition of a trend is a succession of peaks and troughs, each peak and trough being higher (for a rising trend) or lower (for a falling trend) than its predecessor.

If neither definition applies, i.e. peaks and troughs match previous ones, the market is said to be trendless or trending sideways. In addition to their direction, trends can be classified in terms of their length. Most traders consider trends short-term, intermediate-term, or long-term. Long-term trends occur over a timeframe of longer than one year; intermediate-term trends occur over one to three months; and, short-term trends occur over less than one month.

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