In the world of forex, not a few traders find forex technical analysis difficult to do. This technical analysis is considered to have more tools than fundamental analysis.
Beginner traders, in particular, are often confused about the steps in carrying out a technical analysis because they don't understand the basic concepts.
Most novice traders tend to be "fascinated" with trading strategies that are often considered "sophisticated". In fact, forex technical analysis is not as complex as it is often said.
3 Important Points in Forex Technical Analysis
Apart from understanding price direction, you also need to understand 3 other important things in technical analysis. The following include:
1. Understand the basic concepts of technical analysis
In this context, traders must at least understand the charts that are commonly used in technical analysis first in order to know price movements well.
2. Understand the concept of a trendline
Trendline is one of the simplest tools that is important to know because it can help traders, especially beginners, to recognize potential profits in forex trading by simply drawing a line.
3. Understand support and resistance
The concept of support and resistance is very important for traders to know. Basically, they are able to mark the location where the price is most likely to experience a significant move.
How to Do Forex Technical Analysis
When you join the best forex broker, you can learn many things through the forum or free education center. You can also learn how to do technical analysis in the following ways:
1. Recognize an ongoing trend
See and identify the current trend. Starting from a long-term trend, then retreating to a medium-term or short-term trend.
Although you can choose which trend you will take advantage of, it is advisable to look for a long-term trend (major trend) and follow it.
2. Determine the support and resistance levels
In forex trading, this strategy is a boundary that connects the highs and lows of a price where you can look for opportunities to buy in the support area or sell in the resistance area.
If in the first step you take a position in the direction of the trend and see the current trend as an uptrend, then look for long positions in the support area, and vice versa.
3. Validate the trend with a moving average indicator
The moving average indicator can clarify the direction of the trend by smoothing out fluctuations in price movements. You can look at the moving average (MA) to help identify trends.
MA can function as resistance if its position is above the price movement, and if the MA is below the price movement, its function can turn into support.
Because MA is fairly simple and quite objective in determining trends, this indicator is often used as a reference in forex trading.
4. Confirm your forex technical analysis with the oscillator indicator
This type of indicator can give an idea of whether the market is in a state when the price is considered high enough at that time and is often followed by a decline in price (overbought).
Or when the price is considered low enough at that time, and is often followed by an increase in price (oversold).
5. Determine the stop-loss and profit target
In determining the stop loss and profit target, you must not forget the risk-reward-ratio rule where the risk of loss cannot be greater than the profit target.
To be sure, you are obliged to determine how big the volume of transactions you make. If in the event you experience a loss, the risk received does not exceed the risk tolerance you have received.
Join the Didimax forex broker so you can get the best facilities for trading. Starting from free education to demo accounts to practice trading.
As discussed above, doing technical analysis is not a complicated thing if you learn it and practice it. Look for maximum benefits by utilizing forex technical analysis.
