What is technical analysis in forex trading?

If you have wondered what is technical analysis in forex trading then here is the simple answer. Technical analysis is an attempt to forecast future price movements by the examination of past market data. Put more simply, technical analysis is learning from the past behaviour of forex markets. If you are a forex trader, or hope to become one, then the application of technical analysis will bring better discipline to your trading strategy while lessening the chance of your making emotional errors.

Forex traders, like you, make use of price charts, volume charts and certain mathematical representations of market data, which are called studies to identify trends and also to determine the probable strength of that trend.

If you become a trader who wants to know what is technical analysis in forex trading then you will make use of such chart price types as bar charts, candlestick charts and point and figure charts to help you study price action, high, low, opening and closing price patterns.

You will also make use of various types of technical indicators, which measure various factors. Trend indicators, such as moving averages and trend lines make it possible for you to see persistent price trends.

Strength indicators, such as volume or open interest show you the intensity of the market’s opinion on certain price.Volatility indicators, such as Bollinger Bands, show you the scale of day-today price fluctuations. You will be able to use data about changes in volatility to predict price changes.

Cycle indicators, such as Elliott Wave, show you repeating patterns in the market. Support and Resistance indicators, like Trend Lines, show the price levels where markets repeatedly rise or fall and then reverse. Finally momentum indicators discover the strength of a trend through time. You will find that momentum is highest at the start of a trend and lowest when the trend changes.

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment. 

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