Technical Analysis

Question 1

Explain Price Action Trading

Answer 1

Price Action Trading takes a look at Previous Important level of a Market and compares it to the Current price.

If the price is above the reistance line, you can assume it will follow a trend and reach a support line to where you could sell.

However, it can also go back down to where you would need to establish a Stop Loss

Question 2

Explain Peak and Trough progression

Question 3

Explain how to identify a “Reversal” in Peak and Trough Progression

Answer 3

Before, you had each Peak and Trough rising higher or lower than its predecessor.

Then a Rally fails to climb to a new high or a new low indicating a reversal.

Question 4

Explain the Peak and Trough Dilema

Answer 4

In example A, point x represents a dip at the trough which only gives half a signal of a reversal.

• It is until the peak refuses to surpass the last one that we get the full signal of a reversal

In example B, point x represents a bigger peak which gives half a signal of reversal.

• It is until we see the smaller dip that we get the full signal of a reversal.

Question 5

What constitutes a legitimate Peak or Trough?

Answer 5

A reaction to the prevailing trend should retrace between 1/3 or 2/3 of the previous move.