We focus on technical analysis in this article with a description of some important indicators.

We can say, all traders use technical analysis is rich but not all of the technical analysis of wealthy merchants though TA is the most appropriate way of trading the Forex market. It also noted that the fundamental role they play is useful in indicating whether the price will go up or down. It gives you an edge over other traders.

Technical analysis is so strong for several reasons

1) it is a number. All information and its impact on the market and traders are represented in currency prices.
2) It helps to predict trends and foreign exchange market is very ‘trendy’.
3) a particular chart pattern is consistent, reliable and repeatable. T.A. helps us to see them.

Here’s one way of putting into perspective the technical analsysis (wish I had a dollar every time I said “technical analysis”). We all know that prices move in trends. Research has shown that those that trade ‘with the trend of’ greatly increase their chances to make a profitable trade.

Trends help you become aware of the overall market direction and are often saved us from the point of entry less profitable. I attended a 2 day course cost me over $ 2500 AUD and the biggest thing I learned from it is the need for discipline and emotional control. Content is very basic in 3 or 4 the next article, I will cover it all. So the learning ‘tools of the trade “that technical indicators and their application will help you to diagnose what the market is doing but even then you need to expect the ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find currency prices. If EUR / USD is 1.4224 and 1.4090 then moves to 1.4180 then the market is in a downtrend. Concern yourself only with what the market IS doing rather than what might be done. Listen to the market and the indicators will reserve what they tell you.

Moving Averages.
Tell your price at a particular point in time during a certain period interval. They are called moving because they provide the latest price while calculating the average based on the size of the selected time.

They lag the market so as to give an indication of changing trends, use the average shorter as the day an average of 5 or 10 moves. By combining short-term and long-term MA you can detect a signal buy when the short-term moving average crossed the long term in an upward direction. Or sell signals when crossing toward the bottom. For example, you could use a day 5 versus day moving average 20 days versus 40 days or an average of 200 moving.
There is a simple moving average, linear weighted which gives more importance to the new price or weighted exponentially. The latter is a favorite because it considers all the prices in a period of time but stressed the importance of recent price changes.

MACD
Based on moving averages, MACD plots the difference between an average of 26 exponential moving average and the 12-day exponential moving, the day of 9 is used as a trigger line. If the MACD turns positive when the market is still falling it could be a strong buy signal. The opposite is also working.

Bollinger Bands (sounds like an elastic band)
Prices tend to remain between the upper and lower bands. They expand and become more narrow depending on the current market volatility. A sell signal would occur when the moving average of the Bollinger band and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate Changes.

Fibonacci retracement
Explain the cycles found throughout nature and when applied to technical analysis can find the shift in market trends. After the price rise is often traced back most times all the original steps. Support and resitance levels often occur near the Fibonacci retracement level.

RSI
Relative Strength Index measures the activity of the market to see whether it is overbought or oversold. This is a key indicator that helps to show what the market will do (awesome!). RSI shows overbought Ahigher number (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conculsive signal before entering the trade.

Always remember, “When in doubt, stay out!”. Technical analysis does not factor in the political news, economic profile of a country or a fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit trades for profit or to minimize losses.

I hope you find this article useful.