Technical analysis for trading on the Forex market is one of the main analytical tools that combines several ways to analyze the existing market situation.
Basic principles of technical analysis
There are basic concepts of technical analysis, which are the basis of any trading strategy:
• Prices always change, the market moves down or up. In the intervals between the main movement forms a flat - the lateral direction of change in the currency market.
• Everything affects the price. The emerging political and economic news, the stability of the economy and the commodity market, consumer abilities of the population - any of these factors can drastically change the price.
• History repeats itself. U-turns, falls, fleets in most cases act on the same levels. Identified trends can be repeated several times, and it allows traders to predict the direction of prices in advance.
Techniques for researching in technical analysis
Methods for building and using technical analysis include:
• Study of the price movement of a currency pair over the past period (each determines for itself a time frame from 1 week to a month). This allows you to determine the most accurate changes in value in the near future and in time to open the desired position and enter the market.
• Graphical method. It works on the basis of plotting price and time. Traders use different time frames from a minute to a month. The longer the time interval on the chart, the longer will be the analysis of price movement to determine the main trend.
• Candlestick method. The most used method is the use of Japanese candles. The principle is to determine the price change in a certain period of time. Candles can even be used by beginners, as they easily convey the right information. Each element of the candlestick displays four indicators that are displayed on the graph in the form of a candlestick.
A Japanese candle has a main body, the boundaries of which reflect the initial price of opening and closing positions. Wick of candles or shadows indicates the maximum or minimum value of the price for the selected period.
Using these methods of technical analysis allows the Forex trader to obtain complete information on the price movement over the past period and correctly determine further positions for profit.
Technical analysis is reduced to choosing the right moment to enter the Forex market. These can be pivot points, the moment the trend appears in the flat, even the usual correction of a currency pair when it rises or falls. When there is a sharp price reversal, traders use technical analysis and manual control to fix losses or profits and exit from the market.
To receive new articles instantly Subscribe to updates.
