To Learn Technical Analysis Means Understanding the Inside Bar
When it comes to learning technical analysis, a lot of investors will consider the "big picture" patterns and make short-term trades based on such indicators or patterns. The problem, however, is that bigger picture readings are often long-term in nature. So, let's take a look at a short-term pattern.
The inside bar pattern is one such pattern from which investors can take short-term cues. This pattern indicates a possible change in investor sentiment in the short-term. In other words, if the overall trend has been heading down, the inside bar often indicates a reversal in that trend.
Identifying an Inside Bar
For investors who are learning technical analysis, identifying the inside bar might be a little more difficult. It involves a taller bar one day, followed a smaller bar the next. The smaller bar consists of a trading range within the preceding day's taller bar.
Confirm The Pattern
Making trades solely on an inside bar pattern is not recommended. Whether just learning technical analysis or a seasoned investors, people need to find support for their decision in other analysis. This includes fundamental data about the security, market as a whole, and sector, as well as other technical data. In particular, using support and resistance levels will help, along with studying the security's momentum.
In terms of the inside bar itself, investors will find greater reliability when they discover the bar that follows a sharper inbound trend. As well, the wider the first bar and shorter the following bar, the better as this indicates the stronger momentum has ended, and the possibility for a more dramatic turn.
And lastly, the volume level should be lower for the second bar than for the first, as this hints at a better balance.
When it comes to learning technical analysis, investors should remember that there are many other indicators that need to confirm their trade decisions. As well, there are plenty of specialized software programs available to make simple buy and sell recommendations. - 23200
The inside bar pattern is one such pattern from which investors can take short-term cues. This pattern indicates a possible change in investor sentiment in the short-term. In other words, if the overall trend has been heading down, the inside bar often indicates a reversal in that trend.
Identifying an Inside Bar
For investors who are learning technical analysis, identifying the inside bar might be a little more difficult. It involves a taller bar one day, followed a smaller bar the next. The smaller bar consists of a trading range within the preceding day's taller bar.
Confirm The Pattern
Making trades solely on an inside bar pattern is not recommended. Whether just learning technical analysis or a seasoned investors, people need to find support for their decision in other analysis. This includes fundamental data about the security, market as a whole, and sector, as well as other technical data. In particular, using support and resistance levels will help, along with studying the security's momentum.
In terms of the inside bar itself, investors will find greater reliability when they discover the bar that follows a sharper inbound trend. As well, the wider the first bar and shorter the following bar, the better as this indicates the stronger momentum has ended, and the possibility for a more dramatic turn.
And lastly, the volume level should be lower for the second bar than for the first, as this hints at a better balance.
When it comes to learning technical analysis, investors should remember that there are many other indicators that need to confirm their trade decisions. As well, there are plenty of specialized software programs available to make simple buy and sell recommendations. - 23200
About the Author:
Chris Blanchet has more than 16 years of experience as a Financial Advisor at one of the world's largest banks by market capitalization. To learn technical analysis free visit Online Trader Today.com where Chris writes about Technical Analysis and Options trading. Chris also maintains a debt-free blog at How To Repay Debt.com
posted by X - Men @ 2:03 AM
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