Technical analysis
Forex Technical Analysis
It can be to identify the most suitable moment to enter the market to "buy cheaper, sell more expensive" - it can be the detection of a trend reversal point, determining whether its direction is suitable for entering the market at the current moment, or, for example, identifying potential opportunities to make money even during flat periods. In an uptrend or bullish trend, you can make money both on the growth of the price of a currency pair and on temporary pullbacks (correction). In the case of an unforeseen reversal of the price against open trades, the trader will have to determine at least an approximate time of closing trades with profit.
Manual closing, Stop Loss and Take Profit orders are used. The search for the closing point is based on the same rules of technical analysis.
For ease of use of technical analysis, the trading period from the beginning of trading on Monday to their completion on Friday is divided into equal intervals - time-frames. Thanks to them, it is possible to analyze the most significant parameters. These include the price at the moment of opening/closing of the period, price minimum/maximum, volumes.
Basic postulates of technical analysis:
Prices take everything
[ 01 ]They are influenced by absolutely any political or economic factor (sometimes also climatic). The degree of influence is determined by the significance for the state, whose currency is traded in
Prices follow trends
[ 02 ]The value of currencies is constantly changing. As a result, currency pairs rise and fall in value. During certain periods, a flat period may occur - a time of uncertainty, when the price does not change much over time
History repeats itself
[ 03 ]Trend reversal and flat market conditions are observed at the same price levels. A trend that was once observed can be repeated many times, which is what traders use in their trading systems
Technical analysis tools
Periodic repetition of previously occurring events allows you to prepare for them and, having timely identified a tendency to return to previous positions, earn profit. The trader has a lot of tools in his arsenal: support/resistance levels, ascending and descending channels. The terminal has built-in functions of drawing the necessary lines on the chart of a currency pair; they can be accessed from the "Graphical tools" panel.
Tools are offered in addition to the standard lines:
- Grid, veer, arcs, time zones, Fibonacci chart channel
- Lines, Gann veer
- Fourier series
The listed trading "add-ons" are an attempt to mathematically predict the subsequent price movement on the basis of techanalysis of the previous trend dynamics in the market. The use of channel tools allows trading at the moments of price reversal inside the channel, taking into account the current trend. Channel lines indicate where a correction reversal is most likely to occur if the price is moving against the trend, support/resistance lines show the price level where a trend change is likely to occur, the beginning of a prolonged correction. All technical analyzing tools are based on mathematical calculations and they are used mainly as a basis for determining the trend, and more precisely the moment of market entry is determined by indicators.
Use of Japanese candles
Forex technical analysis includes monitoring the components of Japanese candles such as:
- The body of the candle. Color means the direction of price movement. By default, white is used for rising candles and black for declining candles.
- Candle Size. It indicates the strength of selling/buying pressure. There are Dodgy candles when the opening price is equal to the closing price.
- The presence of the tail and its size. Displays the indecision of sellers/buyers in the market, which leads to price fluctuations around an unchanged level.
Figures are formed from different types of candlesticks, their combination can be used to determine the current trend (trend), approaching reversal.
If there is no certainty on the candle of the H1 period, the trader switches to the lower timeframes and thus provides a more accurate Forex techanalysis.
If we are talking about scalping, act the opposite - work mainly on the lower TF, and the general trend is watched on the older ones.
Candles also reflect the volatility of the currency pair. If you switch to periods from H4 and above, it will become clear in what range the price is moving in the current month or this week, whether there is a risk of reversal, market entry into a long-term flat. Precise results are reached due to using additional tools, searching for patterns, indicators. When a trader counts on a long-term perspective, a more dynamic picture on the TFs below H1 allows to react faster to the signals appearing on the intervals H4 and above.
Graphic figures
There are 10 basic figures of technical analysis.
Triangle
It is bull, bear and symmetrical (the last one means the continuation of the previous trend).
Diamond
Visually, a rhombus-like shape is formed on the chart, the tops of which are resting on resistance/support levels.
Double top
A reversal pattern suitable for use both as a separate tool and as an additional signal.
Wedge
One of the "long-playing" figures, it can be formed during a long period, which is convenient for use in long-term trading strategies.
Triple top
One of the tools for determining the trend reversal point, which works in moments of consolidation.
Double bottom
Another figure indicating the change from a downtrend to an uptrend.
Flag
Observed after news impulses, indicates its continuation in the previously determined direction.
Pennant
A pattern similar to a flag having a similar definition.
