Lots of factors affect your trading results. You can’t do anything about some of them, but you can constantly work on your psychology and money management. However, these skills are useless if you are not able to predict the asset price.
A successful investment starts with finding a good entry point. And this is what neither strong psychology nor competent money management can help you with. It is essential that you understand when you should open an up or down trade during every trading session.
But which method of forecasting should you choose? Are there many ways to forecast which direction the price will go on Olymp Trade? Especially for you, we have prepared this article on the most popular and effective trading techniques.
Each section is a brief description of the method. You can use this information to continue your studies. Despite its summary format, the material will help you get a good understanding of the approaches that can be used in traders’ work.
Trend Analysis Using Technical Analysis Patterns
Technical analysis is one of the most popular types of market analysis. Traders started actively studying it at the beginning of the twentieth century. Over time, they have compiled a set of working patterns.
Patterns became one of the sections of technical analysis. It is a kind of chart movement schemes. If the current asset chart resembles some pattern, a trader can open a trade in the right direction.
The gold chart provided us with an excellent example. The asset has formed a so-called “head and shoulders” pattern. This is a reversal formation, which signals of a change of the trend direction. It consists of three elements: a left shoulder (L), a right shoulder (R), a head (H).
There are other successful patterns like “triangle”, “triple top”, “diamond” and so on.
Trading on Economic News
Economic news are important reports from ministries of different countries. Investors use them to determine whether it is all fine with the economy of the region.
We know the schedule of such releases in advance with the help of the economic calendar, which provides information on the kind of report, expert forecasts, date and time of publication.
You can read more about the economic calendar here. You will learn how to distinguish an important event from a minor one, and you will also get a list of major reports that almost always lead to trend turbulence.
Besides, Olymp Trade experts have prepared 3 basic news trading strategies for you. You can find them on the company’s official blog.
There is an opinion that this is the most effective approach for intraday trading. Indeed, price action not only teaches you to find entry points in any market and trading mode. It gives you something more — namely, the understanding of the market.
What does it take to start price action trading at Olymp Trade? Firstly, you need to have a good understanding of support and resistance levels. It is a kind of the asset price limits. They can help you know in advance where the asset price will reverse.
The second thing is Japanese candlesticks or a bar chart. These ways of presenting market trends provide traders with a detailed picture of the price highs and lows over a selected period.
The concept of Price Action is to find visual confirmation of who dominates over the market — bulls or bears. For example, if the candlestick highs are increasing, it is a clear sign of the power of bulls (buyers). It is better to look for entry points close to the support and resistance levels.
Look carefully. Here is the gold chart again. Three candlesticks appeared near the resistance level (the horizontal line, which the price could not get above), and their highs were declining. For price action traders, this moment could be used to enter a down trade.
You can get more information on the Price Action from a webinar conducted by the Olymp Trade specialists.
Earnings Reports Analysis
It may seem that this approach to trading on Olymp Trade will only be suitable for professional financiers and accountants. However, it is not! You are not going to buy the whole company anyway. We are following the trends in their stock. And you don’t need to know the difference between EBITDA and EBIT for that. Although it would be great if you could learn about it as well.
The most important indicators for the company, which investors are interested in, are profits and dividends. If a company reported an unprofitable quarter, its shares may start getting cheaper against this background. Or maybe the board of directors decided not to pay out dividends but invest that money in some dubious startup. This another reason why the asset price might get lower.
However, such stable enterprises as Microsoft, Google, Facebook, IBM, or Apple have good performance, so their shares have been rising in price until the last crisis. By the way, you can buy or sell one of these assets using a x20 multiplier. This means that your potential profit will increase 20 times.
Haven’t you heard of Fibonacci yet? In short, the Fibonacci methods are a set of price analysis techniques based on the scientific works of Leonardo Pisano, a mathematician.
For example, Fibonacci levels can help you find the points of the asset price reversal in advance. Note that we have set the grid using the visual high and low. The rest of the levels appeared automatically. And a trader could make a down trade and earn at least twice.
Here’s another great case study. You can take a look at the EUR/GBP chart and see that Fibonacci levels gave a huge amount of signals.
Lifehack: not to wait for the asset price to reach some Fibonacci level, we recommend using the price orders.
And if you want to master the use of Fibonacci techniques, this article is a must read for you!
It only seems to be a simple thing to learn how to enter trend-following trends. In fact, first you need to learn how to determine these trends, check their strength, find price targets.
When intraday trading, investors often hunt for price reversals. How do they do it? It is simple! Oscillator indicators are their best helpers in getting reversal signals.
These include such indicators as RSI, Stochastic, CCI, DeMarker, ADX and many others. Most often, their working principle is very simple: we have a top zone (overbought) and a bottom zone (oversold). If the indicator line has entered one of the zones, it means that the asset is either overbought or oversold (i.e. the price has dropped or risen too much), so it is time to prepare for a reversal.
Take a look at the image below: the CCI and RSI lines are entering the zones below or above the shaded channels. Meanwhile, the asset price is rising and then declines again to rise later. But the oscillators helped traders find the entry points.
Panic and Newspaper Rumors
If you can wait, you can trade without analyzing the chart at all. For this you only need to have at least basic understanding of politics and international relations.
Let us give some examples:
- If North Korea conducts a nuclear test or missile launches, the Japanese stock indices (Nikkei 225 and others) tend to decline.
- The global spread of the COVID-19 coronavirus has led to a halt in business activity in the U.S. and the European Union. And as soon as business has stopped, the country’s GDP will also fall and this factor has a very strong impact on both the exchange rate and the stock market.
- The dismissal of senior managers or the turmoil in the board of directors inevitably has a negative impact on stock prices. The collapse of the securities may also be caused by tragic circumstances, as was the case with Boeing and its infamous 737 MAX. Aircraft crashes in Ethiopia and Indonesia resulted in the revocation of permission to use this model and increased costs.
This is how simple conclusions help to find assets to buy or sell.
Simple Moving Average (SMA) is a popular indicator that clearly shows the average price of an asset over a certain period of time. If there is a period of 50 in the SMA settings, the average price will be calculated by the last fifty candlesticks.
It is assumed that if the asset price is below the SMA line, the asset will tend to get cheaper. But when the chart manages to get above the line, the buyers will have more chances to earn.
The Use of Olymp Trade Signals and Analytics
Olymp Trade experts are experienced economists who have been trading in the financial market for many years. They publish a lot of interesting analytical notes on a daily basis.
Daily reviews are published in the company’s blog. You can use the information about important events or one of three scenarios of price movements of different assets.
Analytical reviews for traders with the Expert status include 7 forecasts on currency pairs, indices, stocks, and other assets. This is more than enough to make well-grounded trades without spending much time.
You will also find interesting information to help you decide on the asset and predict the direction of trends on the trading platform.
Personal Trading Instructor
Every Olymp Trade client has the opportunity to go from a beginner to an autonomous level quickly, thanks to a personal financial consultant. Periodic consultations with the consultent are already available with the Advanced status, but only Expert traders get an effective and intensive training.
What do such consultations give?
- Firstly, the consultant will be able to determine exactly what kind of theoretical training you need and helps you get it.
- Secondly, a personal trading instructor will show you by his own example how to make trades, how to manage money, how to protect yourself from losing trades.
- Thirdly, a financial advisor will tell you how to overcome the excitement and keep calm when trading.
But that’s not all. The company’s experts support a signal service right on the platform. In addition to the recommendation, traders receive a brief comment on its reason. Business is mixed with some pleasure.
Can we call this list of methods for analyzing the asset price when trading on Olymp Trade complete? Certainly not, but now you understand what direction you can move in.
Besides, do not forget that each of the techniques can be combined with another one. Such symbiosis can be used to check reliability or to get more signals.
The main thing about trading is not to stop. Each trade makes you more experienced, and it means that you are moving towards your goal.