Technical analysis – a powerful weapon in the hands forex trader

Technical analysis is one of the main tools the majority of professional traders. This method of study of markets has its roots dating about 100 years ago. Basic theoretical principles described as one of the first Charles H. Dow. Unlike fundamental analysis, technical analysis uses only information provided by the market itself, such as price, trading volume and volatility. The aim of technical analysis is primarily a destination for future price developments, possibly the continuation or change of trend with the greatest probability. The basic principles could be summarized in the following paragraphs.

- History repeats itself: Given that neither the human psyche has not changed much, it can be according to certain price formations and patterns very well predict future prices. This is technical analysts have spent a long time and is known to many of these pricing formulas.Certainly many of them show in the next articles.

- Markets, trend: probably best known theorem is well-known adage – the trend is your friend.Trends distinguish primary, secondary and secondary (or tertiary). Generally one could say that it is usually not advisable to go against them or against the main of them. The Forex is usually very strong trend, and trade against it you could pay a lot. Forex is usually located in one of its phases, either uptrend or downtrend. Of course it is not rare even without a clearly identifiable stage trend. In this period it is sometimes better to stand aside and wait out the market for a real opportunity that is coming.

- Everything is already included in the price: Technical analysis assumes that all available information that could affect the price, they are already counted in the price. They are mainly macroeconomic data, the political situation and reports of a similar type.

So how do you start?

As we have said, “forex technical analysis” is the study of graphs. How can such a graph look like? There are basically 3 types of graphs. Column, bar and candle. All these types can be viewed at the following figures. To study their charts, you can choose basically any. The most common are beef and bar. These 2 types of Trader is providing more information than a bar graph. Most important, however, is to confess in his chart. Before you attach images, see, how does such a candle or a comma in the graph looks like.

 

 

 

 

 

Open - the opening price at which the first trade took place and in any timeframe, not a comma or a candle

Close - closing price

High - the highest price that was achieved during the period

Low - the lowest price achieved

Candle chart

 

 

 

 

 

 

 

 

 

 

 

The bar graph (bar)

 

 

 

 

 

 

 

 

 

 

 

Bar graph

 

 

 

 

 

 

 

 

 

 

 

 

The technical analysis inherently includes trend lines and other various indicators. These forex indicators are known wealth. For a beginner it is not easy in them confess. But do not panic if you stick to those basic, not to worry.

Again, you will certainly say a lot more pictures that you see below.

 

 

 

 

 

 

 

 

 

 

Uptrend - gradually rising prices. Such a trend may last from several minutes to many years. It depends on what the monitor. The trend is a long time, it is stronger.

Downtrend - gradually decreasing prices

 

 

 

 

 

 

 

 

 

 

Support - the level at which the price has a tendency to stop and go in the opposite direction

Resistance - the level at which the price tends to stop and go in the opposite direction

Both these values ​​are very important forex trader and the correct interpretation can be easily used for profitable trading.

As I said earlier, there are many indicators that the study of graphs commonly used. Those, however, we will focus on some of the other articles on technical analysis. These indicators can measure the strength of the trend, the direction of the trend, volatility, cycles and even momentum. But that something will talk another time. The best known indicator is the MACD, Bollinger Bands, Fibonacci, RSI, Stochastic and many others.

What to say in conclusion?

I hope today’s article showed what technical analysis is and that you take a moment to reflect on this theme. It should of course count on the fact that even this is not the holy grail. Yes, used properly, of course, technical analysis times will increase your chances of success. But do not expect that only the proper use of indicators, you will earn big money. Often enough to involve ordinary common sense and your chances increase a bit again. I believe that technical analysis you will, because it’s really powerful weapon in your hand. Her study, although not exactly easy, but it’s worth it! Next time we will continue with more detail and introduce some technical analysis tools.

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