Forex Technical Analysis Strategies

December 11, 2020

price movement

This exercise can help a trader to determine relationships between markets and whether a movement in one market is inverse or in concert with the other. For example, a stock market recovery could be explained by investors who are anticipating an economic recovery. These investors believe that companies will have improved earnings and, therefore, greater valuations in the future—and so it is a good time to buy. However, speculation, based on a flood of liquidity, could be fueling momentum and good old greed is pushing prices higher until larger players are on board so that the selling can begin. News traders rely on economic calendars and indexes such as the consumer confidence index to anticipate when a change will occur and in what direction price will move.

cmc markets

For downtrend, you need to click on the Swing High and drag the pointer to the recent Swing Low. For uptrend, do the opposite i.e. click on the Swing Low and drag the pointer to the recent Swing High. A retracement is a move in price that "retraces" a portion of the previous move. Usually the common 3 Fibonacci levels are - 38.2%, 50%, and 61.8%. In downtrend market Fibonacci price retracements are confirmed from a prior low-to high swing to identify possible support levels as the market pulls back from a high.

Reverse charting

Those traders would also want to be on top of any significant news releases coming out of each Eurozone country to gauge the relation to the health of their economies. Forex technical analysis strategies are created by the combination of the above signals and patterns. It is a good idea to combine signals of indicators with price patterns to receive more reliable indications on a potential trade. For example, an MACD crossover after a major counter-trend move can be much more reliable as a trade signal than any value of the MACD, however extreme it may be. In a major triangle movement, a divergence or convergence between the RSI and the price can be far more reliable than the extremes registered on the indicator. A forex technical analysis trading strategy is created by using many different types of price phenomena that are manifested on many different kinds of indicators.


Enjoy technical support from an operator 5 days a week, from 9 a.m. Uncertainty figures mean that the market could move in any direction, and one should abstain from the trade. If the price penetrates the descending trend's line, bottom-up, then one should open a trade to buy. Plus500SG Pte Ltd holds a capital markets services license from the Monetary Authority of Singapore for dealing in capital markets products (License No. CMS100648). To try our indicators, simply sign up/log in, select an instrument, go to its chart and click on the icon.

How to Choose The Best Forex Trading Strategy

First, we have the MACD line that’s obtained by finding the difference between the 12-day exponential moving average and the 26-day EMA . The strategy involves looking for a confluence or ‘coming together’ between the Fibonacci retracement lines (32 %, 50% or 62% lines) with the pivot support line. For instance, if you want to enter a long position during an uptrend, you may look for a confluence before entering the market. For a strong signal, it’s better to wait for a bullish confirmation candlestick. The Fibonacci gives the highest indication, and it’s supported by the pivot point.

Natural Gas Technical Analysis: The Price is Rising for the Sixth ... -

Natural Gas Technical Analysis: The Price is Rising for the Sixth ....

Posted: Thu, 02 Mar 2023 01:53:32 GMT [source]

This means finding currency pairs that are currently undervalued and selling them once they reach your desired profit level. Another popular scalping strategy is to wait for the market to turn around and then enter into a long position. This can be done by using technical indicators or simply by paying attention to price action. Improve your forex trading skills with our comprehensive guide on forex trading strategies.

On the side, traders use momentum indicators and moving averages to analyze price movement over multiple days. From a fundamental standpoint, swing traders often use micro- and macroeconomic indicators to help determine the value of an asset. Why have so many former equity and futures traders chosen to trade in the currency markets? Many have discovered that technical analysis works exceptionally well in the forex markets, and are reaping the benefits of trading in the global marketplace. Technical analysis is simply the analysis of past price movements to help predict future price movements. In many cases, a trader using technical analysis is simply looking for the repetition of past occurrences.


We will examine later, but at this stage let us examine the signal types that are used to create them. The trading strategy is a simple guide used by forex traders to help establish the best forex trading plan for their own style. The strategy is especially helpful for new traders who may be overwhelmed by the dozens of currency pairs available and the 24-7 nature of the market. 86% of retail investor accounts lose money when trading CFDs with this provider.

Among the most well known lagging indicators are the Moving Average Divergence Convergence , Parabolic SAR, and Bollinger Bands. Technical analysts will mainly use indicators either as an alert, or a confirmation, that the current trend might be changing, or accelerating in the existing direction. A support level is usually a level where the bulls take control over the bears, stopping prices from falling. Conversely, a resistance level is a level at which the bears take control to stop the price from rising further. A trendline connects significant higher lows if the price is following an uptrend – this is an ascending support trend line. Trendlines connect significant lower highs if the price is following a downtrend – a descending resistance trend line.

Divergence occurs when the values are farther apart as time passes. In both cases, the principle behind convergence/divergence dictates that the indicators make movements in opposing directions, and the phenomenon is used to signal that the ongoing trend is getting weaker. Thus, before going any further, the trader must check which periods, which values provide the pattern that is most fitting for the price action on the chart. For example, for the RSI, will we pick a period of 14, 10, or 7 for the chart we examine? Or what will be the periods of the moving averages that constitute the MACD indicator?

Scalping Trading

Position trading is a strategy in which traders hold their position over an extended time period—anywhere from a couple of weeks to a couple of years. As a long-term trading strategy, this approach requires traders to take a macro view of the market and sustain smaller market fluctuations that counter their position. Trend trading doesn’t require traders to know what will happen next—only to understand what is happening right now.

Our entry strategy will help you maximize your profit potential and minimize your risk level. How to install the Commodity Channel Index on MT4 & how to interpret its signals. Wedge patterns can be bullish or bearish, depending on the current trend shown within the wedge, and they are generally longer term patterns . Any good strategy should be able to work using just two or three major indicators, at most. Don’t get stressed about exact settings or variations – these routes just lead to over-optimization and are a waste of time.

While the ratios have been adapted to various technical indicators, their maximum use in technical analysis remains the measurement of correction waves. Many hedge fund managers believe that technical analysis trading has a role and a place in every investor’s toolkit. One of the biggest mistakes retail traders make is not looking at the big picture trend, and the four candle hammer strategy capitalizes on this market pitfalls. The four candle hammer strategy works both intra-day for day traders and for swing traders who tend to hold positions for a more extended period of time.

Trading in this market involves buying and selling world currencies, taking profit from the exchange rates difference. FX trading can yield high profits but is also a very risky endeavor. There are innumerable ways to approach Forex trading and to base your entries and exits on. Traders who aim to reach profitability upgrade their trial-and-error ways into asort of a trading system with a specific set of rules.

  • A lot of traders fail because they can’t respect their own risk management.
  • One of the main benefits of forex day trading is that it doesn’t require a large investment.
  • In the case of a standard account, a trade will be placed with 0.4 lot, resulting in 4 USD profit or loss in each pips movement.
  • The simple reason they work is that the techniques have been proven over time by countless market reactions.

That's why many beginner traders find it helpful to use a forex scalping robot that can do the heavy lifting for them. Exinity Limited is a member of Financial Commission, an international organization engaged in a resolution of disputes within the financial services industry in the Forex market. FXTM gives clients the opportunity to test strategies in a risk-free environment. With our Forex simulator, you don’t have to risk your capital until you’re confident in your ability to make successful trades. You use fractals to identify a reversal and confirm its existence in very volatile or chaotic markets. Your concentration will be tested, as this high-intensity trading style requires you to constantly monitor the market.

This chapter explains how traders use this technique to optimal effectiveness in the currency markets. In summary, fundamental analysis is more of a long-term approach – essentially it will help explain the ‘why’ of a price move. Continuation patterns describe situations where the price trend is likely to follow the current direction. Among the most common continuation patterns are triangles, flags, pennants, as well as the cup and handle. Price pattern recognition is a very powerful technique when trying to identify a trend. Price patterns are recognisable, repeatable patterns in the price of a market.

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