Technical analysis of forex market is one of the primary methods of characterizing the fx market, next to the fundamental one! With the advancement of technology and rise of super-fast computers in recent times, this mode has become exponentially advanced and widespread.
Technical analysis of forex market is a trader’s cornerstone strategy and most trading firms using high end computers make use of technical trends and its numerous statistic data points.
Its authentic oscillators:
Technical analysis of the forex market involves numerous oscillators. From Relative strength index and stochastic oscillators to Bollinger bands, if these names are filling up with trepidation, then don’t worry you are not the only one. But the good news is that they are quite easy to use and incorporating them into your fx decision making will vouch you success.
The below section will explain all easy and no-nonsense methods for using these indicators. So, fx-ers, sit tight and follow.
Moving Average (MA)
Utilizing Moving Averages for technical analysis of forex markets is still considered to be the oldest amongst Fx analysis oscillators. It is mainly used to check the direction of the price trend.
Fx traders always try to seek a trend while analysing pricing data. They also try to detect the trend reversal point with aim to finding those most profitable levels of purchasing and selling. For both cases, moving averages prove to be a good option for them.
Moving averages, helps smooth out the probable market fluctuations which take place time after time. It helps you to detect as well as substantiate the possible rate trends of fx market through up and down fluctuations of rates, frequently witnessed in most currency pairs.
Made by John Bollinger, Bollinger bands detect the extent of real-time volatility for a given currency pair. These bands are situated atop a price chart and comprise of an MA accompanied by upper and lower bands which explain pricing channels.
Relative Strength Index (RSI)
RSI or Relative Strength Index formulated by Wells Winder was disclosed through his book New Concepts in Technical Trading Systems, 1978.
This is an oscillator cum indicator which moves up and down responding to changes in the market rates. Numerous traders as well as exponents have labelled it as the best mode for checking out the strength of the existing market trends.
RSI explains 2 thresholds for traders conducting technical analysis of forex trends:
- If the reading equals or falls below 30, it is regarded as oversold. It is then considered as a possible increase in rate.
- If the reading equals 70 or above, then it is considered overbought. In that case it is regarded as a possible decrease in rate.
Fibonacci retracement lines are centred upon Fibonacci sequence. This is regarded as a predictive indicator which gives feedbacks on possible exchange rate measures of the future.
Its predictability still involves mixed reactions and hence the best thing would be to double the feedbacks from other sources before putting down your bets.
This was crafted by George C Lane. As per records, it was the first technical analysis of forex market indicator to be used for getting insights about FX market direction. It follows a premise which states that - at the time of a market uptrend, price will equal or rise above the last period ending price. Whereas during downtrend, price will stay equal or go below the last period ending price.
This technical analysis of forex market aims to forecast the present trend’s continuation possibility by utilizing a scale to gauge the changed degree from one ending to the other.
Now that you have gone through some of the common technical analysis of forex market oscillators, its time you get started with a demo FX account. You will not just get used to the forex trading techniques and tools but also know what are the technical terms in forex live.
Best of luck!