Forex Technical Analysis Strategies

Forex Technical Analysis Strategies


Good technical analysis will tell you ‘when’, good fundamental analysis will tell you ‘why’. Fundamental analysis is the study of economic, social, as well as political forces that affect the supply and demand of a financial asset and the risks that influence its price. Theory, The Forex Chartist Companion will help serious traders use technical indicators to enter … You can look at past data to help you spot trends and patterns which could help you find some great trading opportunities.

price action

  • The best way to trade news is to sit on the sideline and wait for the noise to settle.
  • This approach is completely opposite of holding a position for hours, days, or even weeks.
  • You should consider whether you can afford to take the high risk of losing your money.
  • Some trade the news and change their focus based on global economic events.
  • While shooting star patterns are very easy to identify, it is important to realize that candlestick patterns shouldn’t be the only reason you enter a trade.

Because participants keep reacting in the same way, there is a self-fulfilling prophecy aspect in technical analysis. In this chapter, we’re going to start to introduce you to the main methods of analysis Forex traders use and the strategies they yield. Applied technical analysis for advanced learners and practitioners, emerald group publishing limited, Bingley, 1-29. During the five-month test period, the best trade-in terms of pips gain were 7290 pips, and the worst trade-in terms of pips loss were pips. A losing trade would be re-analyzed in the chart to determine the actual reason.

Average directional index (ADX)

And in uptrend market, retracements are run using the same ratios from a prior low-to-high swing, looking for possible resistance levels as the market bounces from a low. With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. If you correctly follow this technical analysis strategy guide, then you should have a better understanding of how the market moves and how smart money operates in the market.

forex markets

Successful position traders may open just a few trades over the entire year. However, profit targets in these trades are likely to be at least a couple of hundreds pips per each trade. Scheduled events e.g. economic statistics, interest rates, GDPs, elections etc., tend to have a strong impact on the market. By now, you have identified a time frame, the desired position size on a single trade, and the approximate number of trades you are looking to open over a certain period of time. Below, we share three popular Forex trading strategies that have proven to be successful. We will keep our indicators simple, but we will make sure that the signals generated by them are examined and exploited to the full, allowing us to draw a complete picture of the price action.

Tools Used

This is due to certain facts of the analysis that are relevant for the stock market (like a company’s quarterly reporting or dividend info) but aren’t suitable for the forex market. Still, the techniques used in technical analysis can be applied to both the stock and forex markets. The Ichimoku Cloud, like many other technical indicators, identifies support and resistance levels. However, it also estimates price momentum and provides traders with signals to help them with their decision-making. The translation of ‘Ichimoku’ is ‘one-look equilibrium chart’ – which is exactly why this indicator is used by traders who need a lot of information from one chart. The MA – or ‘simple moving average’ – is an indicator used to identify the direction of a current price trend, without the interference of shorter-term price spikes.


The higher peak is the head and the two lower ones are the shoulders. The pattern itself looks like a head between two shoulders, hence the name. Forex system trading is a type of trading where positions are entered and closed according to a set of well-defined rules and procedures.

Relative strength index (RSI)

Thanks for the education and helping we retail traders.I really appreciate you kinds toward we amateur traders. Tnx a lot Rayner, wit ur ideas I have develop my trading strategy …tnx a lot once more and may god bless u. So… when the market finally breaks out, traders who miss the move can’t wait to enter on the first sign of a pullback. If you’re a swing or position trader, look to enter near the open of the week.

Technical and statistical indicators produce mathematical signals from their formulas which are applied to historical prices and sometimes volume to indicate the state of the market in that asset. Such indicators can measure overbought or oversold conditions, relative strength, and the potential for price to continue in the same direction or reverse. There are literally hundreds of price indicators available, with the MACD, moving averages, RSI, and Bollinger Bands being some of the most popular. It makes sense to be aware of the major indicators, what they indicate, and what the strengths and weaknesses of each are.

Crude Oil Forecast: Continues to Look for Some Kind of Direction –

Crude Oil Forecast: Continues to Look for Some Kind of Direction.

Posted: Tue, 28 Feb 2023 17:17:04 GMT [source]

Scalping is an intraday trading strategy in which traders buy and sell currency with the goal of shaving small profits from each trade. In forex, scalping strategies are typically based on an ongoing analysis of price movement and a knowledge of the spread. Because swing trading demands quick action and close market oversight, it’s typically favored by day traders who are available to monitor changes in price momentum minute to minute. Despite being classified as a short-term trading strategy, this approach demands that traders hold their position overnight and may keep them in a trade for a few weeks at a time. When price reaches the overbought level, traders anticipate a reversal in the opposite direction and sell.

Although using Fibonacci retracements can help you determine when to enter and exit a trade and what position to take, they should never be used in isolation. The most successful retracement traders confirm breakout and reversal signals using other technical indicators such as moving averages, trend lines, momentum oscillators, and price candlestick patterns. Position Trading – Position trading is a strategy where traders hold positions for longer periods of time, usually weeks or months. Position traders will generally utilize fundamental analysis and economic data. However, when opening a new position, position traders might make use of technical analysis. Furthermore, a position trader may wait until a currency pair reaches a support level before taking a long position and holding it for a few weeks.

Some of the more popular candle patterns used in forex analysis include dojis, hammers, hanging man, morning and evening stars and engulfing candles. Technical analysis is the evaluation of a financial asset through the study of historical market statistics. Technical analysts don’t believe that market price movements are random. Rather, they believe that these movements create identifiable patterns and trends that repeat over time.

You have a stronger by combining it with support and resistance. Trading strategies are not one-size-fits-all; different traders are comfortable with different strategies within different market conditions. Forex traders also are able to use eastern technical analysis techniques like candlestick patterns, particularly for short-term term trading and identifying key turning points.

future price movements

The core idea is that the relationship between supply and demand determines the exchange rate. Supply and demand result from fundamental factors, investors’ expectations, and various rational or irrational factors. Therefore, the relationship between supply and demand in the foreign exchange market is the only situation that needs to be studied. To draft solid Forex trading strategies, that are immaculate in all aspects, requires accurate fundamental analysis.

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information. A popular advice in this regard is to set a risk limit at each trade. For instance, traders tend to set a 1% limit on their trades, meaning they won’t risk more than 1% of their account on a single trade. However, an individual trader needs to find the best Forex trading strategy that suits their trading style, as well as their risk tolerance.