Forex technical analysis: The most popular forms
There are various forms of Forex technical analysis and the indicators of this are momentum based, the support and resistance, the moving averages and the trend lines just to name a few. The only inputs are the stock’s price and volume. These inputs are what separates forex technical analysis from fundamental analysis.
The Forex technical analysis is used by readers so that they are able to gain a better overall scope on an investments price history. Fundamental traders will then look at a chart so they are able to determine, if they are getting a fair price, selling at a cyclical top or are entering a sideways or choppy market.
The core assumption of a technical analysis is that all known fundamentals are factored into price, which means that these fundamentals will not need too much attention as they are ruled by the price.
There are many forms in a technical analysis and here the indicators of the forex technical analysis are discussed.
Forex Technical Analysis Indicators
The trend is where there is an indication of smooth price data out, which means that is a constant up, down or even sideways trend that can be seen. The trend in stocks can be seen by creating an average over the daily price that is set over a fixed period of time.
The history of the price is owed to support and resistance, which is like supply and demand. Support depicts the areas where buyers have been before, whereas the resistance is where the sellers hinder the price to stop the advance.
Strength is what will describe the intensity of a market opinion on a certain price. This is done by examining the market positions that is taken by various market participants. The basic ingredients of strength are volume or open interest.
Volatility is the magnitude of day to day price fluctuations. When there is a change in volatility then you can expect a change in price.
Cycle indicators show the repeating market patterns from events that repeat themselves. The cycle will then show the timing of a certain market pattern.
Trend lines refer to the entry and exit points and are similar to support and resistance. Trend lines differ though in that they are projections, which are based on how the stock has been tried in the past. Trend lines are used in Forex technical analysis for stocks moving to new highs or to new lows when there has been no price history.
There are quite a few momentum based indicators and include Bollinger Bands, Chaikin Money Flow, stochastic and moving average convergence divergence. These indicators have all of their own unique formulas and are able to give buy and sell signals based on the varying criteria. The momentum indicators are generally used in range bound or in markets that do not have trends.