Posted by forex at 2:58 AM
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1. Identify individual trends on the chart. This is relatively easy to do --- a rising column of x's is a positive trend (increasing prices), while a falling column of o's is a downtrend (falling prices). These columns represent uninterrupted price trends.
2. Identify places where trends are interrupted. Interruptions in trends are represented with short, alternating vertical lines of xxx's and ooo's. These lines represent a tug of war between the supply and demand forces on the chart.
3. Look at the prices listed next to the chart points (the xxx and ooo columns). The prices corresponding to the up and down trends will tell you the price band in which the rise or fall occurred. The high point on a column of ooo's is the high point in a price drop, whereas the low point on a column of xxx's is the low point of a price increase.
4. Try to discern a general trend on the chart. Generally speaking, if there are more xxx's than ooo's, the general trend on the chart is an uptrend, and vice versa. However, in some cases, a clear trend will not be apparent. This is generally signified by an even balance of xxx's and ooo's.
5. Re-evaluate individual trends in terms of the general trend. Uptrends that exceed the tops of previous uptrends may be taken as buying signals. Downtrends that exceed the bottoms of previous downtrends may be taken as selling signals. Trends whose tops and bottoms are fairly stable could be taken as hold signals. However, do not make buying and selling decisions on the basis of these factors alone; also take into account financial fundamentals such as price to earnings ratios, price to book value and earnings growth.