Forex Technical Analysis: Why it is so important in Forex Trading?
Forex Market cannot be predicted accurately, Forex Technical analysis is the science or skill of forecasting of the future movements of the price using the past movements and data.
Obviously the past movements cannot guarantee the future movements. So, the analysis done on the basis of past movements is not hundred percent accurate. But if you learn the technical analysis properly, you can make more correct predictions. At the end of the trading day you will be in profit .
The foreign exchange market is a very strong trending market. There are lots of ups and downs in short periods of time. Where technical analysis can be very effective.
If you want to become a profitable forex trader you will need to use as many technical indicators as you can, or create a personalized trading strategy based on a combination of these indicators, to recognize with the best accuracy possible the trend. In other words, a professional forex trader will try to identify the major trend, the intermediate trend, and the short-term trend and then construct his trades in that direction based on how long their rules allow him to hold a position.
Learning the basic skills in Forex, such as how to read Forex chart is really important. If you buy the currency pair, that is, you’re long the position; realize that you’re looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.
On the other hand, if you sell the position, then you’re looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.
You can read daily technical analysis and forex market news along with updated economic calendar to make your daily trading profitable.
Technical analysis takes this concept one step further, and claims that all that matters to trading is the price action itself. In other words, traders should disregard news events, statistics and data, along with economic and political developments, and concentrate all their attention on the price itself.
Types of Technical Analysis tools:
- Bollinger Bands
- Relative Strength Index
- Stochastic Oscillators
- Fibonacci Retracements
- Moving Averages
- On-Balance Volume
- Average Directional Index
- Aroon Indicator
Those are the most common and used forex technical analysis tools and methods in the field of forex trading.