Forex technical analysis is one of the most popular strategies that most traders use to analyze economies, currencies and markets to help them make the right buying and selling decisions.
Fundamental Analysis V/S Technical Analysis
There are essentially two kinds of analyses in the forex market – fundamental analysis and FX technical analysis.
In fundamental analysis, traders study the real economy of a country, its political developments and relations to trade partners in order to predict which way the market will go.
For this you will basically need to follow the news and read economic
reports so you can assess the state of the economy of a particular
Forex technical analysis is quite different. It does not consider real-time situations. You do not have to read the news but instead you have to look at the recent history of the currency’s value. You can then use technical indicators such as Bollinger bands and moving averages to plot charts, which make it easier to assess the progression or the trending.
Basically, it involves using past market data to predict possible future trends of any currency. Because trends tend to last longer in the forex market, learning to recognize a trend in the earlier stages can mean higher profits.
Here are a few ways to improve your technical analysis skills so that you can maximize your profits.
Focus on long term patterns
When you are using FX technical analysis, don’t look at the short time patterns. They do not give you the real picture. Longer-term patterns allow you to get a bigger picture of the ups and downs of the currency and allow you to make a better evaluation of the price movements.
Simplify your charts
With so many different technical indicators and concepts, you may be tempted to want to try them all. However, it is inadvisable to overpopulate your charts with too many different programs. Selecting just two or three that work for you will make the charts easier to read.
Focus on facts
It’s easy to get swayed by current events and other people’s opinions but that will only create unnecessary confusion. When you are using forex technical analysis, stay focused on the data and the charts they generate and don’t get distracted by anything else.
Don’t ignore the experts
No matter how confident you may be about your own analysis, it is a good idea to listen to what the experts are saying, especially about the currencies you are studying. If what they are saying is in sync with your conclusions you know you are on the right track. However, if their opinions contradict your conclusion, then perhaps you need to re-think your position.
These are just the basic tips on forex technical analysis. There are several more that you can use. If you’d like to know me, get in touch with me and I’ll get back to you. You can also read more about forex scams and forex alerts