Technical analysis is the core foundation of trading. Without knowing the technical analysis no one can find the sweet trading spot. Even if you manage to decipher the high impact news, you will require strong knowledge of technical analysis to find your next trade. It’s the foundation of the trading business. Though technical analysis is very easy to learn, rookies in Singapore often learn things in the wrong way. There are four important technical factors you must learn with a high level of precision. These are –
- Support and resistance level
- Reversal point or zone
- Swing high and swing low
- The risk to reward ratio
Support and resistance level
These are the two most important levels that every trader should know. Without having strong analytical skills, you won’t be able to find the support and resistance level. Many traders don’t even know the purpose of support and resistance level. Support is such a price zone that pushes the price higher. In contrast, resistance is such a price zone that push the price lower. Usually, long trades are taken when the price hits a critical support level. On the other hand, you need to go for the short trade setups when the market hits a critical resistance level.
To draw support or a resistance level, you should be connecting the minimum two highs or lows. Choose the daily or the weekly time frame so that you don’t have to deal with the minor support and resistance level.
Reversal point or zone
Finding the reversal point is very easy provided that you know the perfect use of the professional platform. Visit the site of a reputed broker and you will find many good platforms that will allow you to find the perfect signals in the market. While trading the key reversal, you should be extremely careful about the time chart. If you choose the lower time frame, it would be really hard to make real progress. But if you choose the higher time frame, you can trade the key reversal.
Try to learn about the key chart pattern because it can boost the profit factors to a great extent. With the help of the head and shoulder chart pattern, you can trade the bearish reversal. To trade the bullish reversal, you should be trading the market with the inverse head and shoulder chart pattern.
Swing high and swing low
When the market reaches a peak, it is known as the swing high. If the market reaches a new low it is known as the swing low. The concept of the swing high and low is used to determine the key retracement point. But for that, you have to learn to use the Fibonacci retracement tools. While using the Fibonacci retracement tool, you should be extremely careful about the time frame selection. Drawing the key retracement levels in the lower time frame can increase the risk to a great extent and cause you big trouble. So, keep things simple and select the perfect time frame so that you don’t have to lose too much money in any trade.
The risk to reward ratio
The last thing that you need to consider is the risk to reward ratio. Try to place your trades with a positive risk to reward ratio. Trading with a high risk to reward ratio always makes things complex. In fact, it causes you to lose more money. But those who have a strong risk to reward ratio plan can place quality trades without having any issues. So, try to learn about the key method to find good trade with 1:3+ risk to reward ratio so that you don’t have to think about the recovery factor. Keep the risk low in each trade so that you don’t become frustrated after losing a few trades.