The Complete Guide to Forex Technical Analysis
Forex technical analysis is all about seeing what happened in the past to figure out what needs to be done to earn in the future. Here’s how to do it.
“Forex technical analysis.”
It has an intimidating ring to it, kind of like “Calculus II” or “root canal.”
Are you frowning yet?
Well, don’t frown, Debbie Downer. Understanding forex technical analysis is really easy and relatively painless (at least, compared to a Calc midterm or a visit to the dentist’s office).
The forex is a trading market that is open 24/7. The fact that it is open all day every day allows us to keep track of trade prices at all times.
Trade prices extend to forex quotes. Forex quotes are the comparison of one currency against a base currency.
But the forex does a lot more than just let us draw a currency chart. It lets us track patterns in the market.
It sounds incredible, being able to track and effectively predict the market. The market, by design, is meant to be unpredictable.
That’s because people run the market. And people are also by design unpredictable.
That’s where forex technical analysis comes into play.
Forex Technical Analysis At Play
First, we need to establish the what’s what in the trading system:
You’re probably thinking, “Trending? This is the forex, not Twitter!”
#YoureCorrectSirOrMaam. But much like Twitter, we want to keep track of what’s hot and what’s not.
While analyzing the forex, you’ll likely see the line representing your trade price moving up and down.
When a trade is “trending,” it is moving in a diagonal direction either up or down. We call the up movement “uptrending” and the down movement – you guessed it – “downtrending.”
Trending shows us the direction that the market’s heading in, so it’s important to be able to look at the forex and see if your trade is trending and, if so, how it’s trending.
When a trade is neither uptrending nor downtrending it is – surprise! – moving in a clear, sideways direction.
Trades in a range aren’t really doing anything. They aren’t making you boatloads of money, but they aren’t losing you boatloads of money, either.
They’re kind of just sitting there, waiting for the next trend to hit.
Support and Resistance
While a trade’s in range, it establishes a “support” and “resistance” price.
The “support” price is the lowest price it hits while the “resistance” price is the highest price it hits.
Since the trade is in range, neither of these prices will be drastic. You can think of them as the trade’s “not-too-low” and “not-too-high” prices.
You got those key elements down pat pretty quickly. Good job, Slick!
Now comes the time to analyze them.
There are many different established patterns that the forex typically follows. However, it’s important to keep in mind: to err is human, and so to err is also forex.
While you should know these patterns so you can predict what to do with which trade, when, where, and why, you should also know that, like so many things in life, they aren’t guaranteed.
Go with your gut. Use strategies that work for you.
And hey, Future Trader Extraordinaire: for a little extra predictability boost, check out this excellent training that can help you navigate the forex market like the pros do.
Now get out there and get your trade on!