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Submitted by: Sean Goudeloc
Technical analysis market is a type of Forex analysis technique that heavily relies on numbers and historical data. It makes use of charts, quotes, indicators (both simple and complex), supply and demand volume, and most especially, the data about past market performance. Its main purpose is to give traders a clue on what will happen in the market based on all the data that was gathered from the past.
Many online trading platforms provide users or traders with different types of technical analysis. By using technical analysis tools, you can have a better projection of the ups and downs in the market. With the knowledge you get from this kind of analysis, you will be able to make better trading decisions and minimize risks of trading in the Forex market. However, you do have to remember too that even the most profitable Forex traders do not stick with technical analysis alone. Technical factors are often weighed vis- -vis fundamental factors. Make sure that you consider other techniques like fundamental analysis for a better reading of the market.
Technical analysis market trading involves different types. A few of the most popular types of technical analysis tools are charting, volume indicators, Bollinger bands, relative strength index, and Stochastics. Each of these types has unique methodologies to generate data. These also help you look at the technical factors from various perspectives. Below are brief explanations about those types:
The most basic type of technical analysis in Forex is charting . Fundamentally, it focuses on knowing and analyzing the highs, lows, and closing prices within a certain time frame in the market. Using this type of technical analysis will let you immediately know the major trends within the market, areas of support of trends, and resistance to the price movements.
On the other hand, volume indicators focus more on telling traders the current and upcoming trading volume for them to know if there will be sudden rise or fall, or a reversal. Many rely on this analysis as their leading indicator to predict future price trends.
If a trader wants to check the volatility of the market trends, he will rely on Bollinger bands. The technique gathers the data about the moving average prices in the past 21 days. If you use this technique, always watch out for any sharp tightening of the bands. When you see that, it means that the market s volatility will intensely increase, and a new price trend may arise.
Last, but not the least is the RSI (Relative Strength Index). This type of analysis is used when traders want to predict any forthcoming market reversals. Fundamentally, RSI is a scale starts from zero and ends with 100. If a trader sees a value that is below 20 on it, it is possible that an uptrend will happen. Alternatively, if he sees a value that is above 80, a downtrend may happen instead.
As you can see, Forex technical analysis market is an effective tool you can use in your trading venture. Use it wisely with other Forex tools, and you can expect that your success rates during your trades will rise significantly.
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