What to know about forex technical analysis.
As you jump to learn Forex trading, you must have ever heard about technical analysis before. Known as one of popular techniques for Forex forecasting, technical analysis is widely used in the world of Forex. However, what is it actually? And how can we use it for the benefit of our trading? This article will reveal everything you need to know about this analysis method.
A Brief about Forex Technical Analysis
Along with fundamental analysis, technical analysis is commonly used by professional traders in the Forex market. In Forex, just like any other financial markets, it is used for price forecasting. Different to fundamental analysis, technical analysis is very statistical in nature since the data it focuses on can be effortlessly quantified and then visually demonstrated via charts as well as chart overlays.
1. Technical Origins
Forex technical analysis has actually existed whenever a market driven by supply and demand. It was firstly recorded to being used around the 17th century. At the late 18th century, it began to impersonation as it’s pushed into trading by Charles Dow. In the 20th century, technical analysis then was limited to charting. And today can be considered as the golden age of this method.
2. General Elements of Technical Analysis
Even though Forex technical analysis tends to employ a few tools, methods and techniques, it is basically chart bound. Traders will use charts that are nothing more than a history of price displayed graphically that ease the discovery of price patterns. Then, the price patterns are market formations which generally referred to market moods, the one that can improve winning trades’ probability.
For a lot of technical traders, the strategy to figure out how to do a technical trade is by discovering what the market’s current mood is and how long the mood is going to be there. In order to help classify these major patterns, as a trader you must develop and improve a collection of charting tools. There will be some indicators to apply too.
How Technical Analysis Help You in Forex Forecasting
Believe it or not, the financial market is actually not that simple to analyze. This is because the market is influenced and impacted by a wide variety of factors including, for example, fiscal policies announced by governments, monetary policies regulated by central banks and other internal factors which are determined by consumers and companies. Considering all of these factors are surely not easy.
1. Technical Analysis as Less Complicated Alternative
For trader who finds it too complicated to consider the things above, the existence of technical analysis is surely good news for them. It is because this reliable method only concentrates on just one data: price movement. This analysis offers you a way to determine whether the chart is appealing to trade or not, a way to search for potential trade setup and other things.
2. Technical Indicators
In technical analysis, there are also some technical indicators which are statistically programmed in a trading platform to analyze the relation between variety elements to help on predicting price movement. Generally, there are some popular indicators used including trend indicators like Moving Average (MA), momentum like Relative Strength Index (RSI) and Stochastic Oscillator, volatility like Average True Range (ATR) and volume like Money Flow Index.
Nowadays, technical analysis is broadly used by financial traders around the globe. However, it becomes a favorite method especially for Forex traders since it can be easily applied in various time-frames. But, you might not find this method good for you. That’s why it is recommended for you to learn Forex forecasting method further to find one which is best for your
forex trading personality.