Tips For Beginners On Forex Trading Analysis
Forex trading analysis is divided in two categories: technical and fundamental. The fundamental one is based on the recent economic and political news of one or more nations to predict the foreign exchange market movements. On the other hand, the technical analysis consists of observing the price movements of a specific currency pair in a methodical way, over a particular period of time. These movements can be seen on Forex charts that are quick and easy to use within any kind of Forex trading analysis software. What a trader is basically trying to do is to study the currency price movements and then determine some patterns or potential trend changes. This is how they decide when to enter or exit a trade. Forex analysis is technically based on charts, which are on different time frames, like 15 minutes, 1 or 4 hours or daily. If you do not know how to interpret and correlate these charts, it is virtually impossible to make profitable trading decisions.
Foreign exchange trading analysis charts can be represented in many ways, but three of them are the most popular: the line chart, the bar chart and the candlestick chart. The line one is the most basic type of chart, as it only connects the closing price of one time interval with the closing price of another interval. The bar chart however will also show you the opening prices for each time frame, as well as the highest and lowest corresponding values for these intervals. Lastly, the candlestick charts will display just the same information as the one called bar chart, but in a different graphic representation. This more intuitive representation of the closing and opening price, and the highest and lowest values makes this type of chart the most popular among the professional and novice foreign exchange traders.
What you should not forget though when doing Forex trading analysis is that the charts alone will not provide you with enough visual aid for you to determine the trend changes before on time. You will also have to add up a few technical indicators such as the RSI, or the Relative Strength Index and the Stochastic Oscillator, which are used to signal an overbought or oversold condition. Other helpful Forex indicators are the MACD that stands for Moving Average Convergence/Divergence, the Gann and Fibonacci numbers, and the Bollinger Band. You are highly recommended to use at least a couple of these indicators at once to help you have a better image on what is happening on the Forex market and make more accurate predictions.
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