Using Technical Analysis To Profit In Forex Trading

smithyoung

Trader
Feb 3, 2017
10
3
19
46
Fort Pierce, FL 34950
There are two basic ways to approach the analysis of the FOREX markets: Technical analysis and Fundamental Analysis. Someone who is using a fundamental analytical approach will look at the current economic climate, political events, a variety of economic indicators, and so on to try to predict currency moves. What we will examine is technical analysis, or the use of historical price patterns in economic data to predict future moves in the FOREX. We will also look at the tools used for technical analysis.

The three major assumptions underlying technical analysis are:

1 - All market forces are taken into account in price movement. Many things can affect the price of a currency. Some of these factors would be economic conditions, political happenings, natural disasters, seasonal supply and demand and even the weather. Technical analysis, however, does not attempt to take these into account because the market has already done that. Rather, a technical analyst is concerned with the actual movements of the market, not with the reasons for the movement.

2 - There are observable trends in currency prices movements. There are known market patterns that follow predictable paths.

3 - There are historical trends in price movements. Over a century of FOREX data collection has shown that human nature interacts with events in predictable ways. Thus, when circumstances are similar in the market, the same patterns will show up.

Technical Analysis: Is It Necessary?

Day traders in the FOREX usually use technical analysis most heavily, though they may supplement it with fundamental analysis. Technical analysis has the huge advantage of being applicable to a wide range of currencies and markets simultaneously. To properly do fundamental analysis requires a good knowledge of events and conditions in a certain country so the number of markets any particular trader can analyze by the fundamental approach is necessarily limited.

Technical analysis can seem so complicated to the beginner that they may be tempted to wonder if it is really needed. The truth is that all investing requires a strategy and technical analysis is a proven way to set strategy by predicting FOREX movements. Of course, no strategy or method is always successful, which is one reason many technical traders also do some fundamental analysis as a supplement.

Using Price Charts In Technical Analysis

Charts lie at the heart of technical analysis and you will find a good selection available from any online FOREX broker. Not only are the charts updated constantly, real time, but they can be viewed in a variety of ways. You can see movement over various periods of time, broken down into different time scales, and with various analytical overlays applied. With the software provided you can see the broad picture over a long period or zoom into the most minute detail. The basic software is free from most online Forex brokers but there may be a fee for the more professional, in-depth, information.

Sometimes the charts are a built-in part of the broker's software package. Alternately, they may be available on the broker's website.

Practice, or demo, accounts are available from most brokers on their website. These allow you to use the charts and tools of that particular software to learn the techniques of following charts, noticing and learning about trends and studying market movements. Nothing can substitute for this valuable period of becoming intimately familiar with charts and market behavior.
 
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GazFx

Banned
Nov 13, 2012
478
69
74
61
Melbourne, Australia
www.youtube.com
"1 - All market forces are taken into account in price movement. Many things can affect the price of a currency. Some of these factors would be economic conditions, political happenings, natural disasters, seasonal supply and demand and even the weather. Technical analysis, however, does not attempt to take these into account because the market has already done that. Rather, a technical analyst is concerned with the actual movements of the market, not with the reasons for the movement."

And hence, technical analysis cannot be used to predict or forecast future price movements. Don't get me wrong, I am an avid adherent of technical analysis, and it can be "suggestive" and "indicative" of future price behaviour, but without an understanding of the underlying fundamental factors at play "suggestions" and "indications" are not very meaningful.
 

cioupheoteder

Trader
Mar 9, 2017
4
0
7
45
Technical analysis is only suitable for day trading? How is it in the long timeframes?
Combining technical and fundamental analysis will give more% success or more confusion?
 

GazFx

Banned
Nov 13, 2012
478
69
74
61
Melbourne, Australia
www.youtube.com
Technical analysis is only suitable for day trading? How is it in the long timeframes?
Combining technical and fundamental analysis will give more% success or more confusion?

Technical analysis, whether short or long term, tells you what is happening, whilst fundamentals tell you what will happen. So, fundamental analysis to gain insight to future price action, then technical analysis to alert you when price action begins to move in the forecast direction.
 
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JimTatum

Trader
Jan 28, 2017
40
6
14
30
SanDiego
Technical analysis is only suitable for day trading? How is it in the long timeframes?
Combining technical and fundamental analysis will give more% success or more confusion?
For every trading whether it is a day trading or long-term trading you have to apply technique. So technical analysis is everywhere. Every technical and fundamental analysis are correlated with each other. But it is difficult to view in short-term trading. You can feel it in long-term trading.
 

Ary Barroso

Active Trader
Jul 9, 2017
908
70
39
34
No doubt, technical analysis is another important pillar of Forex market! But, it’s not everything! For being a successful Forex trader, there is no way, without combo trading skill (technical+fundamental)! In addition, only technical or fundamental is not enough.