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Which type of chart is generally considered to give the clearest and most detailed view of market movements and trends?
Candlestick charts are popular with traders because they convey a large amount of data in a visually pleasing, easily digestible format. It's often easier to spot patterns and trends with this type of chart.
When a market price tends to bounce back every time it drops to a particular level, that level is known as…
A support level is like a glass floor, while resistance is like a glass ceiling, appearing to limit a market's range of movement.
What does the size of a candlestick's body signify?
The body of the candle represents the range between the opening and closing prices, while the wick shows the high and low points reached.
When a market touches support or resistance then reverses, this is known as…
If the market briefly touches or jumps through a level then immediately reverses, it's said to be testing the level. If it passes through support or resistance and keeps going, that's a breakout. However, if the breakout isn't sustained and the price reverses again, it's a fakeout.
If you draw a trend line, how many peaks or troughs do you need to confirm the trend?
You only need to connect two major peaks or troughs to draw a trend line, however a third is needed to confirm the trend.
Which pattern has just completed here?
When a market rises to three successive peaks, the second being highest, then drops below the neckline of the two troughs between them, a head and shoulders pattern is said to be complete.
Which of the following chart patterns signify that the market may soon take a downturn?
A rising wedge formation, bearish engulfing or tweezer tops candlestick patterns, all suggest the price could soon move lower. A rectangle indicates a consolidation period where the market is likely to continue in the same direction, while a falling wedge is bullish pattern implying a possible rise.
A doji is a candle with almost no body at-all, formed when opening and closing prices are nearly identical…
A doji occurs when the opening and closing prices are extremely close together, shrinking the candle's body. The wicks can be any length in either direction. A doji often signifies indecision or consolidation before a trend reverses.
If a market is in an uptrend, which of these moving averages would you expect to see appearing above the others on the chart?
Longer-period moving averages are slower and smoother, lagging further behind the current price. In this example, the 10MA is the shortest period. It should therefore follow the price most closely and be the highest of the three moving averages on the chart. If the market was in a downtrend the 10MA would normally be the lowest, however.
What does a moving average crossover generally signify?
As shorter moving averages usually follow the current price closely while longer moving averages lag behind, when their lines cross over this implies that the market may be about to change direction.