What's Technical Analysis? - Technical Analysis Course

Technical Analysis Strategies - Technical Analysis Course Tutorial

To learn how to analyze forex charts, beginner traders will need to learn about the various technical analysis methods used in forex.

Technical Analysis is the science and art of forecasting future forex price movement based on historical prices combined with indicators. Technical Analysis Course - This Technical Analysis study often interprets the price data by studying a chart and looks for forex patterns & forex signals for buying & selling.

The history and origin of this Technical Analysis technique dates back several hundred years to Japanese & Arabian markets, Technical Analysis involves using math manipulation of forex price data to optimize buy and sell points. The use of this type of Technical Analysis in modern computerized programs has become increasingly popular.

The information which the is studied and assessed in forex analysis is price movement so as to plan an entry or exit into a trade. The goal is to determine how the market is trending.

What Does It Really Measure? - Technical Analysis

This Technical Analysis - studies the supply and demand of a currency pair in an attempt to determine in what direction the price will continue to move in.

While forex analysis deals with forex price and forex indicators it is just a measure of investor sentiment.

What to Look for in Technical Analysis

Find the Trend

The motto of forex analysis is: "the trend is your friend." Finding the prevailing trend will help you become aware of the overall direction and offer you better forex opportunities - especially when shorter term market movements give conflicting forex signals.

Daily charts are more ideally suited for identifying long-term trends. Once you have found the overall trend direction then you generally open buy or sell orders in that direction.

Trend or Range

No matter what price is doing, it usually falls into one of those 2 categories. If the price is moving in a setup or in one direction, you can use forex trend lines to analyze where the price should go. If the market seems to be bouncing back and forth in a range, you can use support and resistance lines to make note of where to open buy or sell orders.

One of the greatest goals of Technical Analysis studies & methods in the market is to determine whether a given instrument will trend in a certain direction, or if forex market will continue moving sideways and remain range-bound. The most common Technical Analysis method to determine this is to draw trend lines which are used by investors & traders to determine whether or not the current trend direction of the market will continue. Many investors & forex traders avoid trading in a range-bound market & only buy or sell currencies when there is a trend since this makes trading more predictable.

For forex technical analysts the most important tool is the chart. The purpose of a chart is to provide a visual representation of currency exchange rates quotes (plotted on the y-axis) against time (plotted on the x-axis) for a given currency pair, this chart is used as a basis for making predictions of the future forex price direction.

Forex Trading Trendlines

The direction of these trend lines determines the market trend direction. A forex trend line drawn moving upward represents a bullish forex market trend and a trend line drawn moving downward represents a bearish forex market trend.

Support & Resistance - Technical Analysis

Support and resistance levels are points on a chart which tend to act as boundaries. A support zone is usually the trough or low point on a chart whereas a resistance level is the high or the peak point on a chart. These support and resistance levels are used by traders as buy/sell points.

Moving Averages - Technical Analysis

Moving averages indicator are used to show the average price of a currency pair over a given period of time. Moving Averages indicators are called moving because they reflect the latest price average in the movement of the prices.

Strategy

To be a successful trader you need to come up with a trading strategy that works. There is not one set strategy that is good for all traders. But Rather, each forex trader needs to develop their own forex strategy.

Technical Analysis is the most widely used strategy in the market and is used to decide the entry and exit points.

Market movements have identifiable repeating price patterns that have been studied over many years providing a thorough understanding of these forex market trends and how they can be used to form the basis of a good forex strategy.

There are many Technical Analysis tools available provided to facilitate this study

The beginner forex trader is advised to study each Technical Analysis tool separately to get working knowledge of the concepts & application for each Technical Analysis study. Once you understand one Technical Analysis method, keep on using it while studying others. Each Technical Analysis tool tends to combine well when used with other Technical Analysis Tools.

Support & resistance levels are also used in many strategies. Support is defined as the level that is repeatedly seen as the bottom (floor) - when the price reaches this level it tends to bounce. Resistance level is the ceiling, the upper boundary (ceiling) that a currency pair rarely trades above.

Support and resistance levels are valid for a period of time, until they are broken, When the market breaks through these support and resistance levels, the price is expected to continue in that direction. For example, if the market rises above the previous resistance level, it is seen as a bullish forex signal and the bullish movement should continue upwards.

Longer forex chart time frames establish more stronger support and resistance levels. Traders can use these support and resistance levels to determine when to enter a trade or exit an open position.

Moving averages is another common forex indicator used as to create Forex strategies. Moving averages try to smooth out short term market price fluctuations giving a clearer picture of the currency movements and trends. Traders can draw SMA to determine currency movement tendency to move up or down - forex trend.

If forex price crosses above the simple moving average then it will keep on moving up.

If forex price crosses below the SMA then it will keep moving down

These are examples of forex strategies that can be used individually or combined.

Traders use two or more Technical Analysis studies and to determine when to open a trade order when both Technical Analysis indicators support the same direction. If several Technical Analysis indicators show that the market is moving towards a particular direction the a trader can trade with more reassurance than when one is only relying on one Technical Analysis indicator.

Fundamental analysis should also be used together to reinforce Technical Analysis findings, or vice versa. A trader should ideally take into account two or more Technical Analysis indicators when developing a Strategy.

Every strategy should provide clear guidelines about when to enter and exit a buy or sell trade position, how much loss can be accepted if the market moves in the other direction and how much profit is expected. Following these simple Technical Analysis guidelines can help you become successful in forex.