Forex Technical Analysis – Forex Trading Strategy Explained.

Forex Technical Analysis: Forex Trading Strategy

Forex trading is certainly not a guaranteed way of making money – but there are several strategies that can be employed that many expert traders believe can greatly increase your chances of success.

One of these forex trading strategies is the technical analysis strategy.

What is a forex technical analysis?

With a forex technical analysis a trader will study prices over a lengthy period of time. Generally, this is done using charts that allow you to compare currency price actions to moves that have been made historically. The idea is that if you can find patterns within the historical data then you could potentially predict future movements within the market.

Short-term traders: Those who enter and withdraw from the market rapidly are considered to be short-term or intraday traders. They will often open and close positions during a single market day.

Medium or long-term traders: Usually forex traders with a medium- or long-term view of the market will open a position and then maintain it over a series of weeks or months believing that they will enjoy long-term benefits even if there are short-term fluctuations that do not necessarily go their way.

So what forex chart types are there?

Traders can use an appropriate chart to help them make judgments about the market. Here is a brief overview of the various chart types available:

Line charts: With a line chart there is a line extending from each closing price to the next. It offers a general indication of a financial path over a long period of time.

Bar charts: These offer more depth than line charts as they indicate opening prices, closing prices and the highs and lows that are achieved throughout these periods. Generally they use either a line or a bar to indicate these fluctuations.

Candlestick charts: Showing the highs and lows over a specific period, as well as opening and closing prices, they often take the look of a candlestick. This is seen as a chart that is simple to interpret because it quickly identifies pivot points and reversals.

Remember that using these charts is not a guarantee of success in the forex markets but some traders believe they can help guide them to an increased probability of success. However, for anyone considering entering into these markets it is beneficial to seek independent advice from an experienced forex trading advisory organisation, such as our recommended partner here at Unite.