Technical analysis in forex trading is done to assess the trends in forex trading from a historical perspective to how it is currently. Technical analysis assists a forex trader to identify trends in the forex markets and identify support using timeframes and the use of market price charts.
Technical analysis of forex markets can be done through indicators, technical studies, or by the use of other tools used for analysis. It is important to do a technical analysis as it assists a forex trader to determine when to enter a market and where is the best. Additionally, technical analysis helps a forex trader determine when and where is best to get out of a forex market.
5 Types ofTechnical Analysis Indicators Every Forex Trader Should Learn
This article will highlight five indicators that are used in technical analysis for forex markets. The fivetypes of indicators for technical analysis should be known by every forex trader.
These are technical indicators used to check on the forex market direction and detect breaks in price actions. Moving Averages enable a forex trader to get a feel of the currency pairs trend in general. It should however be noted that moving averages will react faster to changes in price that happen in the forex markets.
The advantage of using the Moving Averages indicator is that it is an indicator that is more stable as compared to other analysis tools. It additionally gives more benefits to forex traders who are working towards longtime forex trade investment in the forex markets.
As for the disadvantages, Moving Averages indicators respond slower to forex markets that evolve fast. Forex traders that are investing a short time in the forex markets will struggle to getbeneficial insights about the forex markets.
Oscillators are indicators that help forex traders know moments when the forex markets get to their limit and the opposite of the current happening is the likely outcome. So for instance, if the forex market price raises, the market prices will tend to go down and this will, as a result, improve the profits attained from a trading game.
The advantages that come with using Oscillators as indicators is that they help forex traders identify opportunities in the forex markets and the trends that have been featured in the recent past. However, the disadvantage that comes with Oscillators is that a trend that has been there may change or a forex trader misses out on an opportunity which they had identified.
This indicator does the work of indicating zones of oversold and overbought zones in the forex market. Better still, Stochastics points out to forex traders’ prices that can be possibly be reversed. Stochastics are not hard to understand and hence give the beginner or potential forex traders great benefits especially because they are just beginning to know what forex trading is all about.
A disadvantage that comes with stochastics is that they tend to produce signals that are false hence this could pull away forex traders from using them as indicators in their technical analysis of the forex markets.
Fibonacci Retracement Lines
The Fibonacci retracement line indicators are used as indicators to find resistance and support levels on a forex trading instrument. The advantage that comes with the use of these indicators is that they are normally part of evaluations done for the forex market business. Another is that their history in acting as indicators is long and a majority of successful forex traders prefer using it as a forex trade technical analysis tool.
The Bollinger band forex trading indicator is used widely as its idea is simple and hence many forex traders have an easy time using it. The disadvantage of using Bollinger Band as a technical analysis indicator is that their indications are based on the performance of past trading forex occurrences. This can hence make it difficult for a forex trader to identify future forex trading opportunities.
This article discussed five types of technical analysis every forex trader should learn. These five types of technical analysis are moving averages, oscillators, stochastics, Fibonacci retracement lines, and Bollinger band.