Forex Technical Analysis

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Forex technical analysis has grown tremendously in popularity over the years. Now that most every trader has access to up-to-the-minute Forex market data is much easier to explore technical analysis than it has been in the past.

Today there are many websites as well as a wide variety of free Forex charting software that make it easy for anyone to create a chart full of technical studies for the Forex market.

While not everyone is sold on the effectiveness of using technical analysis and Forex trading, it is being used effectively by successful Forex traders in financial institutions worldwide. Let’s dive into what technical analysis is and how it can help you profit.

Forex technical analysis uses Forex market data with the objective of manipulating that data in order to make trading decisions. Technical analysis makes use of price, time, and or volume in order to make these trading decisions.

Much of Forex technical analysis starts with a Forex chart. This chart is simply a graphic depiction of the open, high, low, and close data for the particular time period being studied. For instance, on a daily Forex bar chart each bar would consist of the open, high, low, and close of that Forex trading day.

Drawing charts is a no-brainer these days and is modern charting software does this automatically. You simply select the currency pair that you’re interested in as well as the time. You’re interested in and your charting software will present you with the Forex chart you desire. Once you have your Forex chart on your screen you can begin to analyze the Forex market either by using the raw chart data or by using many of the available Forex technical indicators. Technical indicators are drawn on the chart along with the price data. Technical indicators get their name as they are designed to “indicate” something on the chart. The technical indicator may help you see that the market is continuing in an uptrend or that the market is losing momentum is starting to move sideways.

The objective of Forex technical analysis is to aid us in making trading decisions. Technical analysis allows us to see patterns in Forex market data. Identifying price patterns is extremely important. Your objective is a trader justifying the price patterns which are profitable. You may notice by looking on the Forex chart that the market continues to move upward after the high of the day crosses above the 30 day moving average. The real key when looking at price patterns, of course, is to find those that are repeatable. These repeatable price patterns are the ones you may identify to continue to be profitable in the future. Finding patterns that may continue to be profitable in the future can lead to the creation of profitable Forex trading system.

Forex technical analysis can definitely be of tremendous benefit to you. You will need to do your trading research in order to master the ins and outs of technical analysis. This will be time well spent as it can reap huge rewards in your future Forex trading success.