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Forex Technical Analysis
Technical analysis is all about the Forex chart, which comprises of technical indicators, time frames, candlesticks, dates and prices of currency pairs. The technical analysis comes in the form of both manual and automated system. A manual system typically means traders are analyzing technical indicators and interpreting the data into a buy or sell decision. An automated trading analysis means that the trader is teaching the software to look for certain signals and interpret them into executing buy or sell decision. An automated analysis has an advantage over manually analysis due to the fact that it gets rid of economical behaviors in making trading decisions. Forex technical analysis, uses past price movements to determine where a given currency is heading to.
Since technical analysis is everything concerning the chart, you must know and understand how the chart works, by having knowledge on the useful technical indicators, chart patterns, candlestick patterns, time frame analysis, pivot points and Fibonacci retracement levels.
Forex chart
Forex chart graphically describes the historical behavior across different time frames of relative price movement between currency pairs. Charts patterns and trend lines that signal entry points, exits points, reversals and continuations are used by technical analysts to determine the likely direction of a given currency pair.
Technical analysis is the review of past market prices and technical indicators to predict the future movements of an investment. The technical analysts make use of forex chart to view the past in order to predict the future price movement of a given currency pair. The technical traders believe that short term price movements are the result of demand and supply forces in the market for a given asset. For technical traders, the fundamentals of an asset are less relevant, they pay more attention to the technical analysis of price prediction.
Types of Forex Chart
· Line chart
· Bar chart:
· Candlestick chart
Forex Chart Patterns
A chart pattern is a shape within a price chart that helps to suggest what prices might do next, based on what they have done in the past. Chart patterns are the basis of technical analysis and require a trader to know exactly what they are looking at, as well as what they are looking for. There is no best chart pattern, because they are all used to highlight different trends in a huge variety of markets. Often, chart patterns are used in candlestick trading, which makes it slightly easier to see the previous opens and closes of the market. Some patterns are more suited to a volatile market, some patterns are best used in a bullish market, and others are best used when a market is bearish. It is important to know the best chart pattern for a particular market, using the wrong one or not knowing which one to use may cause you to miss out on an opportunity to profit from a particular trade.
Note:
Chart patterns are not a guarantee that a market will move in that predicted direction. They are merely an indication of what might happen to an asset’s price.
Types of chart patterns
There are ten common chart patterns in forex trading viz: Head and shoulders, Double top, Double bottom, Rounding bottom, Cup and handle, Wedges, Pennant or flags, Ascending triangle, Descending triangle and Symmetrical triangle.
Forex candlestick
A candlestick is a type of price chart, used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period. Candlesticks reflect the impact of investor sentiment on security prices and are used by technical analysts to determine when to enter and exit trades.
Types of forex candlesticks
Marubozu, doji, spinning top, hammer, inverted hammer, shaven head, shaven bottom, hanging man, big white candlestick, big black candlestick etc. A candlestick reading can provide a trader, with an information on the three market sentiments: bullish, bearish and a neutral market condition.
Candlestick patterns
At the end of every trading period irrespective of the time frame, a new candlestick pattern is formed. The formation of this past candlesticks into patterns, can help you interpret the price action of a market, and make forecasts about the immediate directional movements of the future asset price.
Candlestick patterns
Forex candlestick patterns are divided into three categories viz: single candlestick patterns, double candlestick patterns and triple candlestick patterns.
Types of candlestick patterns
They are two types of Candlestick patterns which are: bearish reversal candlestick patterns, and bullish reversal candlestick patterns.
Examples bullish reversal candlestick patterns.
Hammer, Bullish Engulfing Pattern, Bullish Harami, Piercing Pattern, Tweezer Bottom, Morning Star and Rising Three Method.
Examples of bearish reversal candlestick patterns:
Shooting Star, Bearish Engulfing Pattern, Bearish Harami, Dark Cloud Cover Tweezer Top, Evening Star and Falling Three Method.
Time Frame
Time Frame refers to the period or time a forex trader chooses to operate on a forex chart. You can choose the time length of the candlestick by selecting the time frame ranging from 1 minute to 1 month on the forex chart.
Currency traders may use multiple time frames to analyze and track a trade. Multiple time frames are needed when you need to do technical analysis. Different time frame gives you different picture of the market. It is like zooming in and out of the map. For example, if you want to see the precise changes in the market right now, you look at the short term time frame: 1 minute or 5 minutes chart. For clear and better results your look at the medium and long term time frame: 4 hours or daily chart.
Time frame is divided into three categories viz: short term, medium term and long term time frame.
Short term
Short term time frame ranges from 1 minutes to 15 minutes. It gives idea of the current market condition. Scalpers often focus more on this time frame for execution of trades.
Medium term
It ranges from 30 minutes to 4 hours. It gives a better picture of the market owing to the fact that it’s not noisy on like short term time frames, traders can make out good analysis on this time frames because, the market trends seem to appear clearly on this time frames.
Long term
It ranges from 1 day to monthly time frame. This time frames is used for proper analysis because trend lines resistance and support can be done on this time frame. Traders use this time frame for proper trading setup.
Note:
Professionals use higher time frame to setup a trade and execute it on a lower time frame. Day traders run multiple time frames from 1 minute to 1 daily time frame to know the market conditions. They make sure this time frames correspond with each other before they choose signal. If they are not in line with each other they have to wait until they all align with each other. Signals can be confirmed with the aide of technical indicators (RSI, MA and MACD) this indicators are the best and user friendly. To get a clearer picture of the signal check the weekly and monthly time frame as well to know the past market conditions then relate it with the lower and the medium term time frame.
Technical Indicators
Technical Indicators are mathematical calculations based on the price, volume or open interest of a security. They enable you know the trending signal, that is, when to buy or sell a currency pairs. They allow you to know when to enter and exit a trade not only but also know when to reverse a trade.
Technical Indicators falls under four categories viz: Trend Indicators, Oscillators Indicators, Volumes Indicators and Bill Williams Indicators.
Categories of Indicators
Trend Indicators
· Bollinger Bands
· Ichimoku Kinko Hyo
· Moving Average
· Parabolic SAR
Technical analysis is all about the Forex chart, which comprises of technical indicators, time frames, candlesticks, dates and prices of currency pairs. The technical analysis comes in the form of both manual and automated system. A manual system typically means traders are analyzing technical indicators and interpreting the data into a buy or sell decision. An automated trading analysis means that the trader is teaching the software to look for certain signals and interpret them into executing buy or sell decision. An automated analysis has an advantage over manually analysis due to the fact that it gets rid of economical behaviors in making trading decisions. Forex technical analysis, uses past price movements to determine where a given currency is heading to.
Since technical analysis is everything concerning the chart, you must know and understand how the chart works, by having knowledge on the useful technical indicators, chart patterns, candlestick patterns, time frame analysis, pivot points and Fibonacci retracement levels.
Forex chart
Forex chart graphically describes the historical behavior across different time frames of relative price movement between currency pairs. Charts patterns and trend lines that signal entry points, exits points, reversals and continuations are used by technical analysts to determine the likely direction of a given currency pair.
Technical analysis is the review of past market prices and technical indicators to predict the future movements of an investment. The technical analysts make use of forex chart to view the past in order to predict the future price movement of a given currency pair. The technical traders believe that short term price movements are the result of demand and supply forces in the market for a given asset. For technical traders, the fundamentals of an asset are less relevant, they pay more attention to the technical analysis of price prediction.
Types of Forex Chart
· Line chart
· Bar chart:
· Candlestick chart
Forex Chart Patterns
A chart pattern is a shape within a price chart that helps to suggest what prices might do next, based on what they have done in the past. Chart patterns are the basis of technical analysis and require a trader to know exactly what they are looking at, as well as what they are looking for. There is no best chart pattern, because they are all used to highlight different trends in a huge variety of markets. Often, chart patterns are used in candlestick trading, which makes it slightly easier to see the previous opens and closes of the market. Some patterns are more suited to a volatile market, some patterns are best used in a bullish market, and others are best used when a market is bearish. It is important to know the best chart pattern for a particular market, using the wrong one or not knowing which one to use may cause you to miss out on an opportunity to profit from a particular trade.
Note:
Chart patterns are not a guarantee that a market will move in that predicted direction. They are merely an indication of what might happen to an asset’s price.
Types of chart patterns
There are ten common chart patterns in forex trading viz: Head and shoulders, Double top, Double bottom, Rounding bottom, Cup and handle, Wedges, Pennant or flags, Ascending triangle, Descending triangle and Symmetrical triangle.
Forex candlestick
A candlestick is a type of price chart, used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period. Candlesticks reflect the impact of investor sentiment on security prices and are used by technical analysts to determine when to enter and exit trades.
Types of forex candlesticks
Marubozu, doji, spinning top, hammer, inverted hammer, shaven head, shaven bottom, hanging man, big white candlestick, big black candlestick etc. A candlestick reading can provide a trader, with an information on the three market sentiments: bullish, bearish and a neutral market condition.
Candlestick patterns
At the end of every trading period irrespective of the time frame, a new candlestick pattern is formed. The formation of this past candlesticks into patterns, can help you interpret the price action of a market, and make forecasts about the immediate directional movements of the future asset price.
Candlestick patterns
Forex candlestick patterns are divided into three categories viz: single candlestick patterns, double candlestick patterns and triple candlestick patterns.
Types of candlestick patterns
They are two types of Candlestick patterns which are: bearish reversal candlestick patterns, and bullish reversal candlestick patterns.
Examples bullish reversal candlestick patterns.
Hammer, Bullish Engulfing Pattern, Bullish Harami, Piercing Pattern, Tweezer Bottom, Morning Star and Rising Three Method.
Examples of bearish reversal candlestick patterns:
Shooting Star, Bearish Engulfing Pattern, Bearish Harami, Dark Cloud Cover Tweezer Top, Evening Star and Falling Three Method.
Time Frame
Time Frame refers to the period or time a forex trader chooses to operate on a forex chart. You can choose the time length of the candlestick by selecting the time frame ranging from 1 minute to 1 month on the forex chart.
Currency traders may use multiple time frames to analyze and track a trade. Multiple time frames are needed when you need to do technical analysis. Different time frame gives you different picture of the market. It is like zooming in and out of the map. For example, if you want to see the precise changes in the market right now, you look at the short term time frame: 1 minute or 5 minutes chart. For clear and better results your look at the medium and long term time frame: 4 hours or daily chart.
Time frame is divided into three categories viz: short term, medium term and long term time frame.
Short term
Short term time frame ranges from 1 minutes to 15 minutes. It gives idea of the current market condition. Scalpers often focus more on this time frame for execution of trades.
Medium term
It ranges from 30 minutes to 4 hours. It gives a better picture of the market owing to the fact that it’s not noisy on like short term time frames, traders can make out good analysis on this time frames because, the market trends seem to appear clearly on this time frames.
Long term
It ranges from 1 day to monthly time frame. This time frames is used for proper analysis because trend lines resistance and support can be done on this time frame. Traders use this time frame for proper trading setup.
Note:
Professionals use higher time frame to setup a trade and execute it on a lower time frame. Day traders run multiple time frames from 1 minute to 1 daily time frame to know the market conditions. They make sure this time frames correspond with each other before they choose signal. If they are not in line with each other they have to wait until they all align with each other. Signals can be confirmed with the aide of technical indicators (RSI, MA and MACD) this indicators are the best and user friendly. To get a clearer picture of the signal check the weekly and monthly time frame as well to know the past market conditions then relate it with the lower and the medium term time frame.
Technical Indicators
Technical Indicators are mathematical calculations based on the price, volume or open interest of a security. They enable you know the trending signal, that is, when to buy or sell a currency pairs. They allow you to know when to enter and exit a trade not only but also know when to reverse a trade.
Technical Indicators falls under four categories viz: Trend Indicators, Oscillators Indicators, Volumes Indicators and Bill Williams Indicators.
Categories of Indicators
Trend Indicators
· Bollinger Bands
· Ichimoku Kinko Hyo
· Moving Average
· Parabolic SAR
Oscillator Indicators
· Average True Range
· Commodity Channel Index
· Moving Average Convergence Divergence (MACD)
· Momentum
· Relative Strength Index (RSI)
· Stochastic Oscillator
Volumes
· Money Flow Index
· On Balance Volume
· Volumes
Bill Williams
· Accelerator Oscillator
· Alligator
· Gator Oscillator
· Market Facilitation Index
Note:
You cannot make use of the whole technical indicators. You can only use one or at least three technical indicators for trend confirmation. But my candid advice is to use the best among the rest. Relative Strength Index (RSI), Moving Average (MA) and Moving Average Convergence Divergence (MACD). Using more than three indicators will lead to false signal.
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