Line Studies
In technical analysis, lines and various geometric figures to be plotted in price charts or in indicator charts are called line studies. Those include the
Support/Resistance Lines and
Trend Lines described above, along with:
Fibonacci Instruments
Leonardo Fibonacci was an Italian mathematician born 1170 AD. He is considered to have invented numerical series during his studies of Great Pyramid of Giza. Fibonacci Numbers are a numeric sequence where each next number can be got by adding the last two ones: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
These numbers are interrelated with a series of curious correlations. For example, each number in the series is approximately 1.618 times more than the previous one, and each preceding one makes approximately 0.618 of the consequent one.
There are several widespread instruments of technical analysis based on Fibonacci Numbers. The general interpretation principle of these instruments consists in the fact that, when the price approximates to lines built with their help, the changes in trend development should be expected.
Gann Instruments
W.D. Gann (1878-1955) developed a number of unique methods of price chart analysis. He paid the most attention to geometrical angles reflecting the interrelation between the time and the price. Gann believed that certain geometrical figures and angles have specific features to be used for forecasting price dynamics.
Gann considered that there was an ideal ratio between time and price if the price grew or fell at an angle of forty-five degrees to the time axis. This angle is designated as "1υ1" and corresponds with unit price increase for each unit time interval.
Other analytical instruments
There are line studies being largely used in technical analysis and helping to define channels and trend changes. These instrements are:
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