Forex technical analysis is useful in determining the future price movements of currencies. Forex technical analysis incorporates a broad range of methods. Support and resistance lines along with trend lines are evaluated on price chart software. Studies such as Fibonacci retracements and Elliot waves can be used to predict future events. Moving averages and custom indicators play a major role in forex technical analysis.
A software charting program is needed to accomplish forex technical analysis. Most forex brokers provide charting programs for clients with an active trading account. Different broker platforms offer various features, indicators, and analysis tools. The basic drawing tools and studies are included on all forex charting programs. Most brokers offer a trial account to practice on the software before trading with real money.
Forex technical analysis starts with the basics. Support and resistance areas are basic technical indicators that imply price areas that the market is likely to stall or reverse. These lines can go back for months and even years. It is important to find the areas by locating reversal points on historical charts. Draw these line to the current price chart to find areas where high probability trades can be entered.
Trend lines and moving averages are also an important technical indicator. The current trend can be drawn on the chart to detect a break or continuation of the trend. The 200 day moving average is a critical price point. Other popular moving averages are the 50 period and 20 period simple moving average. All of these indicators can be displayed on the price chart simultaneously.
Quantitative evidence has been produced that Fibonacci retracements may have predictive ability. Elliot wave analysis also provides a possible solution to predicting price movements. Most charting packages are equipped with the tools necessary to compute these price indicators. Educational resources are available online to learn the basics of these disciplines. An in-depth study of Fibonacci and Elliot systems will greatly enhance forex technical analysis.
Many of the most used, traditional indicators may be the most accurate. The MACD indicator is invaluable for detecting divergence situations. Trading MACD divergence is a popular form of reversal trading. Stochastics and RSI are among the most widely used indicators. Bollinger bands offer a unique view of market conditions. Trading with technical analysis requires the ability to read and combine the indicators. This talent is developed over time, and experience is the best teacher.