In this video, I share 4 advanced technical analysis chart tools for trading the financial markets using price action.
4 Advanced Technical Analysis Tools
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The 4 Advanced Technical Analysis Chart Tools
In this article I am going to share more information about 4 of the best advanced technical analysis chart tools for trading stocks, forex etc. using price action.
These tools can provide another perspective for your technical analysis and can be used on many different financial markets such as the stock market, forex, cryptocurrency etc.
Hopefully you can use these tools in addition to your trading plan, to help you get a different context or perspective of the markets. They may be able to give you that edge that will help you to become more consistent and profitable in your trading.
Disclaimer; this is just my opinion and advice. Any trades you take you are fully responsible for, if you don’t have the background knowledge to know when to trade an when not to then don’t!!!
The first Advanced Technical Analysis Tool that I am going to go through is the Fibonacci Retracement Tool.
This is a great tool for helping you to identify where you would want to get into a trend.
The button for the Fibonacci Retracement Tool is found at the bottom of the screen and is the one highlighted.
In this example the market is on a down trend. The way that you set the Fibonacci Retracement Tool is to select the most recent pull back. Then you click on both the highest and lowest points of the pull back, in that order. As shown by the yellow circles.
This sets the tool at the size that you want it to be.
The different lines that are brought up show the different Fib levels of the retracement. They represent different percentages of this move.
Different people tend to use different percentages as their reference for a pullback. It depends on your strategy that you have proved by Back Testing.
The most common lines used are the the 0.618 level and the 0.786 level so in this instance here we could be looking at the 0.618 level as a gauge for action. These lines are the second and third from the top.
I tent to use the 0.618 level as a gauge for price action.
I would wait to see the price move back to this level to wait for confirmation that price continuing down , before I set a trade.
You always need to asses the over all structure of the market and not just rely on the tools before you set any trades.
This is the retest I was looking for.
This is the confirmation I was looking for to get into this trade short. I set this trade with a stop loss just above the high and set my take profit below the lower low.
Then letting this trade play out it ended up looking like this.
So this trade rallied down and hit the profit target showing that the fib retracement tool can be a good guide to indicate where is a good place to set your trades.
This next Advanced technical analysis tool is similar to the retracement tool. Except that is gives you a diagonal trend line. It is also there to help estimate where the support and resistance is going to be.
I use this more like a trend line would be used, and I find it a nice way to frame price.
This is the Icon.
The way to set the Fib Channel tool is to select the high of the trend then select a high of the trend then select one of the lows of the trend.
Once the trend lines have been established the lines show where there is potential support or resistance.
So if there are any indications around these lines they can be used to help gauge where to take a trade.
In this example price had come down below the channel and then moved back up to re test it. As it was a bearish red pin bar candle, this for me is an indication that its a place to go short on this trade as its rejected the level and is going with the over all trend.
This is the trade that I set, with a profit target of just more than the previous low.
It played out nicely as price then carried on going lower. This is a good example of price rejecting the channel and moving how I predicted.
The next Advanced technical analysis tool I really like to use is the pitch fork tool. This is another great Advanced Technical Analysis Tool.
There are 2 different pitch forks there is the Andrews Pitch fork and the Modified schiff pitch fork, I mainly use the Modified schiff. That is the one I am using here because it looks like the market is reversing on the chart.
To set the pitch fork tool select the tool. The one highlighted in blue.
Then click in order. 1 Lower high, 2 the low of the move then 3 drag up to where price has made a new high.
As you can see this is another great way to frame price and frame the flow of the movement of price action. This tool can be traded in many different ways and is worthy of an in-depth study investopedia.com is a great resource if you want to study this further.
Fibonacci extensions is a the last Advanced technical analysis tool I am going to look at. With it traders can establish profit targets or estimate how far a price may move. Extension levels are also possible areas where the price is expected to reverse.
Extensions are drawn on a chart, marking the price levels of possible importance. These levels are based on Fibonacci ratios.
To draw Trend-Based Fib Extension three points needed. Once the three points are set, the level lines are drawn up to Fibonacci sequence. The first point chosen is the start of a move, the second point is the end of a move, and the third point is the end of the retracement against that move. The extensions then help project where the price could go next. ref www.tradingview.com
This is just a simple guide to show case the tools available that I like to use. All of these tools demand futhar study to be understood properly. Like I said before they are not to be used on there own as a short cut to proper trade analysis but they help to clarify and guide when used as a part of a comprehensive trading plan.
