A technical analysis in the forex market in a long time has been used in usual markets such as the stock market. Methods of technical analysis depend on the history of price in order to predict the future behavior of any forex currency. There are many methods which used for that, but the bottom line is a thing which always depends on the past’s price movements. Technical analysis has some different forms and many ways of use.
One method of the forex technical analysis is using technical indicators. Technical indicators are graphical presentations of the prices actions, which is usually displays in the screen of your trading platform.
Support and Resistance
The main idea of support and resistance is very simple, even for forex beginners for the goal to learn technical analysis. Support can be imagined as a floor for the currency price and the resistance can be imagined as the ceiling for the currency price. When the price goes through a resistance, that level becomes the new level or support. The reverse is displaying when the currency price goes through a level of support.
The best usage of support and resistance’s levels is during trend trading. If the trend goes up, trader wants to go long at the support and at the resistance he takes profit. If the trend goes down, trader wants to go short at the resistance and he takes Forex profit at the level of support.
The levels of support and resistance sometimes aren’t the exact levels of price. Many times, they can be a small range of it. Only if the Forex currency price clearly breaks old levels - support or resistance can be considered broken.
These levels need to be used as reference points when forex trader looks at the chart and try to make a right decision. Support and resistance trading analysis can give trader a not bad idea of where to put his take profit and stop loss stop loss orders.
Both described methods of free technical analysis are related on looking at the forex program’s chart and reviewing the recent history of a currency. What to do if the price following a pattern? What to do if it goes in the range? No matter what currency price is doing, the price usually falls into one of those two categories. If it is moving in one direction or in a pattern, trader can use trend lines to think where the forex price will go. If the price looks to be bouncing back and forth in a range, trader can use support and resistance dates to make his notes of where the currency will change the direction.
Forex technical analysis can be very good and useful, but like other forex trading methods, it isn’t perfect. Traders’ decisions are always up to the distinction of the forex trader making them. There are some very good indicators and technical tools which are extensively available for use in trading operations. With so many people who use similar tools, even having different interpretations, technical analysis can be a self-fulfilling forecast. If many traders see the same forex price area as a selling point, the price could bound as everyone makes similar moves. The question always remains how permanent these moves will be and that is where personal discretion comes in.
Daily forex technical analysis and its methods can be different for each trader. Every trader has their own point of view of where they see support and trends. Traders also have their own ideas on how to set up their indicators. These differences are saying that each trader should create its own trading system. You can take 100 different forex traders and you will get 100 different trading systems which they use. It is this difference that is making forex market work.