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Timeframes
Regardless of the "timeframes"
of the data in your charts (i.e., hourly, daily, weekly,
monthly, etc.), the basic principles of technical
analysis endure. Opportunities exist in any time frame.
But customized settings of the technical analysis
tools are needed for each time period.
On the weekly chart, the scale interval
on the time axis is one week. On the monthly chart,
correspondingly, every bar shows price behavior for
one complete month. It is obvious that in order to
cover a longer period of time and to be able to analyze
long-term trends, one has to compress the price behavior.
A weekly chart, for example, can cover a period of
five years and more, the monthly chart can cover twenty
years or more. This is how the analyst manages to
see far ahead of her-/himself and that is how s/he
can assess the market in terms of the long-term opportunities,
which are really valuable while conducting the technical
analysis.
The order of studying price chart
is very important for deep analysis. It is wise to
start by analyzing long-term charts and then move
slowly to short-term charts. There is less "noise"
on the long periods, that is why graphic models, basic
trend lines and different
levels of support
or resistance are seen more clearly. This accounts
for the type of work with data time periods. If we
start studying short-term market, later on, as the
volume of analyzed data expands, we will have to reconsider
the conclusions several times at least. In the long
run, short-term results may even change completely
after long-term charts have been studied. If we start
analyzing longer periods first, we can establish where
the market is in terms of a long-term perspective.
After that, we could then turn to chart studies which
cover shorter periods of time. That is how an analyst
goes from "macro" to "micro" analysis.
At the final stage of the analysis, we determine the
point of "entry into the market", i.e.,
the point of opening a position. The shorter the last
analysis stage is, the more precisely one can determine
this entrance point.
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