Identifying Key Levels and Patterns in Financial Charting

LONDON, August 19, 2011 /PRNewswire/ --

As price crashes, debt crises and London riots continue to create volatility in the financial markets, charting could prove a valuable market analysis tool for traders everywhere.

Sandy Jadeja, Chief Technical Analyst at financial trading provider City Index (http://www.cityindex.co.uk/), regularly leads free seminars to help traders improve their charting skills. He states: "One of the most common questions asked at my workshops is "What are the key levels on a chart?" The answer is that there are several key levels to observe when looking for an opportunity to trade from."

One of the most common of these is the psychological price level. "For example," continues Mr. Jadeja, "when you are filling your car up with petrol, you often aim to round off the amount to £10 or £20, say. These round numbers are also apparent when it comes to trading financial markets. If you observe the charts, you will notice that markets behave in a certain way around round numbers."

"You will quite often see that markets behave in a certain way as they approach the round number levels. This is what can be referred to as a key psychological level. For example if the FTSE index has been trading at 5,856 and it is heading higher, then we can assume that it will try to aim for the next level at 5,900. This is then called a resistance level, which the index may struggle to break past."

Sandy Jadeja believes that, depending on the type of reaction that takes place at these levels, a trader can certainly create a strategy based on this theory.

"Personally I like to trade patterns and there are several patterns that as a trader you should learn. One of the popular types of charts is a candlestick charts. Within this type of charting method one can look for specific price reversal patterns. You can also look to see if the market fails to break above the key level and then goes on to break below a recent low. You can then assume a move to the downside towards support levels."

"It is important to remember that patterns are not perfect, but can be considered a sensible way to make decisions as long as risk management and money management techniques are applied. Using chart patterns with the correct approach can often yield favourable results in the long run."

Find out more about charting with a free technical analysis seminar from City Index. To see details of forthcoming workshops, visit:

http://www.cityindex.co.uk/learn-to-trade/seminars.aspx

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