Forex Technical Analysis

There are some traders who are simply trading the news and these people are known as fundamental traders. However there are also traders who only trade with indicators and patterns on their charts and these people are known as technical traders. Personally, I am a technical trader and I am going to show you how you can better trade the currency using technical analysis.

Below is some stuff you need to know in order to be able to do proper technical analysis:

1) Candlestick Patterns: This is usually one of the most overlook parts of technical analysis. Most traders do not spend time learning how to interpret candlestick formation and this is why they are unable to trade with success. You do not need to be able to know everything about candlestick but you definitely need to know the various type of reversal patterns or continuation patterns so that you can enter your trade more accurately.

2) Forex Indicators: Once you have familiarized with the candlesticks, you need to spend time to learn the features of different forex indicators so that you know which to choose for your trading plan.

3) Decide on Your Type of Trading Style: There are basically 3 main types of trading styles you can adopt.

You can be a forex scalper who enter and exit a trade within minutes and only trade on the low time frame charts like the 1 minute and 5 minutes.

You can be a forex day trader who enter and exit a trade within the same day and you will be trading off the 15 minutes, hourly and daily charts.

You can also be a position trader who enter and exit a trade within days or even weeks and you will be trading with the daily, weekly and monthly charts.

What you decide to become depends on your time availability. If you do not have a lot of time to look at the chart everyday, you should choose to be a position trader as you only have to take a look at your chart every few days because you are trading off those higher time frame charts.

If you have 1 to 2 hours everyday to do technical analysis, you can choose to be a day trader. You can spend one to two hours to do proper analysis and then place your trade on the day.

If you have the luxury to trade anything of the day and you are a impatient person who wants to see result fast, you can choose to be a forex scalper.

Once you decide on the type of trader you want to become, you can then decide on the time frames to use. At this point of time, you can then create a trading plan with your chosen indicators and a set of conditions that you need in order to enter a trade and exit a trade.

For those of you who are new, this can be a difficult task but it is something that is necessary in order to be successful in this field.

By: Kelvin Dee

Forex trading signals had already played an important role in forex trading. Traders shed a lot of money just to have a perfect signal generator that will give and show them the real way to forex trading success. It is not unusual to invest in some forex trading signals creator that promise a huge profits. Internet had been playing a big slice of this information, giving the trader not just information about forex ins and out but most of all they had been the #1 source of new products and tools that you can use to start trading. By means of forex trading signal, trader had a grasp of what should be done on their trade. It plays a very important role in determining if a trader will generates huge profits. Because of this reason, many trader look for autopilot trading signals generator. There are lots of them on the net, but the question is how can you find the one that really works? Is there really a perfect signals generator? In order to minimize the trading risk it is very important to have a little knowledge about what forex trading signals generator should be acquire.

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There are thousands of manuals about Forex Trading Signals, technical analysis, thousands of guys who tells you how you should to trade. But they all make trading very complicated and – let’s be honest – those systems and manuals gives you NOTHING and they just do not work. Be smart enough to try something new. Something that actually works based on experience of people who already tried and tested the system. Visit Forex Automoney here!

By: Rose Chua

Which it the Forex analysis to generate big profits? Here we will look at a powerful way to conduct your Forex analysis and get on the right side of all the big Forex trends that make the big profits.

In terms of Forex trading analysis, traders either tend to pick fundamental analysis or technical analysis, let’s look at the advantages and disadvantages of these two methods of analysis.

Fundamental Analysis

Studies the supply and demand facts and prices do move to the big long term fundamentals but their extremely hard to judge, as prices don’t move based on the facts but on how investors perceive them and their judgement, is not logical but coloured by their emotions.

The above is clearly shown by the fact that markets collapse when there most bullish and rally when there most bearish.

Technical Analysis

Simply assumes that all the fundamentals will show up in price action, it’s actually a short cut form of fundamental analysis, because in a world of instant communications we all have the news at a click of a mouse and how investors perceive it will quickly be reflected in chart action.

The Forex chartist doesn’t care why prices are moving he just wants to lock into and profit from price trends.

Using Forex charts simply sees the chartist look out for repetitive chart patterns which are the product of human psychology which is constant and it’s a fact that, several chart formations repeat and repeat again and can be traded for profit.

Both the above methods have pros and cons and for the Forex trader the most time efficient way to trade is to use Forex charts and simply follow trends either up or down.

The Best Methodology for Chartists

When using Forex charts, the best way to trade is not to predict in advance but to trade the reality of breakouts to new highs and lows on a Forex chart. All big trends start and continue from breakouts, so by buying significant breaks of resistance and selling breaks of support, you can make a lot of money.

Most traders want to predict and don’t use breakouts but a look at any Forex chart will show you it’s the best way to make money.

You need to pick good breakouts i.e. levels the market feels are important and if you do, trading just once or twice a month, you can make triple digit gains.

So what are the best breakouts to trade?

We will look at this timeless way to make money, in part 2 of this article series on Forex Analysis and show you how, it can lead you to long term currency trading success.

By: Kelly Price

This is also a follow up from Forex Patterns and Forecast Methods Used Today For Successful Forex Trading! Part 1, if you have not read part 1 please do so to bring yourself up to speed.

Technical analysis and fundamental analysis differ greatly, but both can be useful forecasting tools for the forex trader. They have the same goal – to predict a price or movement.

The technician studies the effects, while the fundamentalist studies the cause of the forex market movements. You should combine a mixture of both approaches to get the best results.

Note: If both fundamental analysis and technical analysis point to the same direction, your chances for profitable trading are much better.

So let’s pick up where we left off with the technical analysis from part 1:

Moving Averages – Are used to emphasize the direction of a trend and to even out price and volume fluctuations, or “noise”, that can confuse interpretation. There are seven different types of moving averages:

- Simple (arithmetic)
- Exponential
- Time series
- Weighed
- Triangular
- Variable
- Volume adjusted

The only significant difference between the various types of moving averages is the weight assigned to the most recent data. For example, a simple (arithmetic) moving average is calculated by adding the closing price of the instrument for a number of periods, then dividing this total by the number of times.

The most popular method of interpreting a moving average is to compare the relationship between a moving average of the instrument’s closing price, and the instrument’s closing price itself.

Sell signal: when the instrument’s price falls below its moving average Buy signal: when the instrument’s price rises above its moving average The other technique is called the double crossover, which uses short-term and long-term averages.

Typically, upward momentum is confirmed when a short-term average (15 ‘day) crosses above a longer-term average (50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.

MACD – Moving Average Convergence/Divergence – A technical indicator, developed by Gerals Appel, used to detect swings in the price of financial instruments. The MACD is computed using two exponentially smoothed moving averages of the security’s historical price, and is usually shown over a period on charts.

By then comparing the MACD to its own moving average (the signal line), experiensed traders conclude that they can detect when this will affect the RSI by creating false buy or sell signals. The RSI is best used as a valuable complement to other stock-picking tools.

Stochastic Oscillator – A technical momentum indicator that compares an instrument’s closing price to its price range over a given period. The oscillator’s sensitivity to market movements can be reduced by adjusting the time, or by taking a moving average of the result.

This indicator is calculated with the following formula:

%K=100* [(C-L14) / (H14-L14)] – C= the most recent closing price – L14= the low of the 14 previous trading sessions – H14= the highest price traded during the same 14 day period

The theory behind this indicator, based on George Lane’s observations, is that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low.

Transaction signals occur when the %K crosses through a three-period moving average called “%D”.

Trend Line – A sloping line of support or resistance.

- Up trend line – straight line drawn upward to the right along successive reaction lows
- Down trend line – straight line drawn downward to the right along successive rally peaks

Two points are needed to draw the trend line, and a third point to make it valid trend line. Trend lines are used in many ways by traders. One way is that when price returns to an existing principal trend line, it may be an opportunity to open new positions in the direction of the trend in the belief that the trend will hold and the trend will continue further.

A second way is when a price action breaks through (the principal trend line) an existing trend, it is evidence that the trend may be going to fail, and you (the trader) may consider trading in the other direction to the existing trend or exiting in the direction of the trend.

Note: Do not fall in love with your Forex position, and never take revenge of your Forex position.

By: Orlando Elliott Thompson

Deciding to venture into trading the Forex is a big decision, and it requires you to make some very important decisions about what kind of trader you are and what your goals are for trading the Forex. That’s because trading the Forex is unlike trading any other market. The main difference in Forex vs. all other markets is that the Forex market is never closed, except on weekends. It trades 24 hours a day, 5 days a week. If you like fast-moving action, the Forex is definitely the market for you.

One of the first things you must decide as a Forex trader is what time-frame you are going to trade. All this really means is are you going to trade tick charts, 1-minute, 5-minute, 15-minute, 1-hour, daily, weekly, monthly, or yearly charts? The type of chart you trade will have a huge impact on what kind of trading you will do. The kind of trading you SHOULD do is whatever is suited to your personality. This is something you may not have thought about before, but you should definitely give it some thought before you get too far into your Forex career.

The two main types of trading are day-trading and position-trading. The definition of “day” varies in Forex trading as opposed to other markets, because the Forex trader’s day could happen anytime during the 24-hour period. This is great news for traders in countries not located in the US or Europe, since they no longer have to keep opposite hours from the rest of their family just to be able to trade – since many of the World’s major markets are located in the US or Europe. The Forex gives them the unique opportunity to unleash themselves from the restrictions of someone else’s time zone.

A day trader typically starts each day with no trades left open from the day before. He will start the day by looking at the day’s news and announcements and then examine his charts for whatever activity has been going on overnight and how that activity may have affected what how he was trading the day before. A day-trader will usually trade with shorter time frames, such as 1, 5, or 15 minute charts, since he’s only trying to capture whatever moves happen during the day so he can exit all of his positions by the time his day is over. An hourly chart is probably about as large of a span as a day trader will need to pay attention to. However, most traders will probably keep tabs on the weekly and daily charts in order to know what the major underlying trends currently are.

A position trader, on the other hand, doesn’t worry as much about the short time frame charts because he is looking at the longer time frames such as daily, weekly, monthly, or yearly charts. The position trader might pay attention to the hourly charts in order to find the best entry and exit points, but will not usually trade based on the hourly charts’ movements.

The position trader will almost always be carrying his positions overnight from one day to the next, often for weeks at a time as he waits for the longer-term trends to move him along. The only caveat is that you need to have large stops and fairly deep pockets to keep from getting stopped out due to daily price swings. . If you can absorb the up and down swings that occur on a daily basis, then this is probably the best way of profiting from the Forex, since the Forex tends to trend so well over long time frames. As long as your stops are set fairly far away from the daily price action you will be most likely be able to profit quite handsomely from this type of trading.

So basically, it sums up like this: The day trader can trade with a smaller account because he uses tighter stops and watches the market almost constantly during the day. This can be hectic and stressful, but many traders thrive on the adrenaline rush that this type of trading provides. If your personality is right for this type of trading, then you will probably not be satisfied with slower pace of the position trader.

Position trading is best suited for those who either don’t care for the stress that accompanies day trading, or for those who have deep trading pockets, or both. The position trader also must be able to feel comfortable about whatever positions he has left overnight, since he know the market will be doing things while he is off work or sleeping. For some, especially for day traders, the stress of leaving positions unwatched and unprotected overnight is more stressful than the stress of watching the markets during the day.

Knowing your personality type will help you decide what time frame you will be best suited for trading. If you aren’t sure, then try each one until you decide what suits you best. Just be sure you don’t burn out on the wrong style before you decide, because it would be a shame to miss out on the profitable opportunities of trading the Forex.

Good trading,

By: Seun Oluwaseun