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Forex Technical Analysis Tutorial

Forex Technical Analysis Tutorial

One of the basic principles of technical analysis in Forex is that the historical cost action predicts the future cost action. Because the Forex is a 24 hour market, there is a tendency for a huge amount of information to be used in order to measure future cost activity, hence boosting the statistical impact of the forecast. As a result, the Forex becomes the ideal market for any trader who utilizes technical analysis tools such as indicators, charts, and trends.

In general, it is essential to remember that the understanding of technical analysis stays the same in spite of the assets being observed. There are a lot of books focusing on this area of study. However, this Forex technical analysis tutorial will only concentrate on the fundamentals of why Forex technical analysis is a very well-known tool in trading.

There are a lot of huge elements in the Forex industry, such as big banks and hedge funds, which all have superior computer systems to regularly observe any discrepancies between the various currency pairs.

With these computer systems, it is uncommon to come across any major discrepancy that lasts longer than a few seconds. A lot of traders learn from Forex technical analysis tutorial courses since it helps them understand the assumption that all aspects which manipulate a cost have already been incorporated into the existing exchange rate. With plenty of investors and plenty of traders every day, the flow and trend of the capital is what becomes essential, rather than trying to spot a wrongly priced rate.

Another aspect you need to learn from a Forex technical analysis tutorial is the range or trend. The most general way to identify these attributes is to sketch trend lines which connect the historical levels that have averted a rate from going lower or higher. These levels of resistance and support are utilized by technical analysis traders in order to identify whether or not the lack of trend, or the given trend, will go on.

In general, the main currency pairs, like USD/GBP, CHF/USD, JPY/USD, and USD/EUR, have proved the greatest attributes of trend. Meanwhile, currency crosses are the pairs which have historically proved a higher chance of becoming bound to the range. It is essential for every Forex trader to know the attributes of range and trend since they will not just affect the pairs that are traded, but also the kind of technique that must be used.

Forex traders who use technical analysis use a lot of various indicators, along with resistance and support in order to help them predict the future trend of the exchange rates. Learning how to read different technical indicators in Forex is a study within itself and surpasses the capacity of this tutorial.

Some indicators that are worth mentioning because of their popularity include stochastics, MACD or moving average convergence divergence, moving averages, Fibonacci retracement, and Bollinger bands. These technical analysis tools are hardly ever utilized alone to produce signals and are rather used more in combination with other chart patterns and other indicators.
 

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Fundamental Analysis in the forex

Fundamental Analysis in the forex

The main objective of the investors and the traders is to earn maximum profits in the forex trading with the help of the different plans and the strategies. The fundamental analysis is there from a very long time since the nineteenth century. The Fundamental analysis purpose is to forecast about the future forex market activities on the base of the economic news and the data gathered. The Technical analyses as well as the Fundamental analysis both are required for the smooth trading activities. Although the technical analysis gives much importance to the price while on the other hand the Fundamental analysis accounts for the entire political, social and the economic factors of the economy for meeting the conclusions for the currency pair of the forex market. Also, the major focus of the fundamental analysis is to recognize the most strong forces that are behind the price action and after that preparing the strategies and plans on that basis.

All the various factors in the fundamental analysis will play a role with the different points of time.

It becomes very essential to make a differentiation between the fundamental analyses in the trade forex market and the news trading. The forex markets instant response to the news and the events is typically irregular because there is no time for the evaluation and the assessment and preparation of the appropriate strategy very soon after the news release. The news trading relies more on the technical aspects rather than the fundamental analysis. In the fundamental analysis there is proper analysis and the study of the news data then after that it is worked upon to separate the important information from the irrelevant news.

Upon working on all the useful data of the forex news trading the bigger picture is prepared which can be put into use for the later parts of the forex trading for the future references. All of the economic happenings and the events act together because the single piece of information does not make much sense in the forex strategy if is used singly. The fundamental analysis is considered very tough but there are no proofs or the evidences for that.

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What is Technical Analysis?

What is Technical Analysis?

In investing, fundamental analysis is the analysis of the fundamentals of a company, i.e. whether its business is thriving or going down the pan. Technical analysis doesn’t concern itself with company fundamentals, it attempts to predict the future price of a stock based on previous prices and charts. Stock charts are a reflection of price movements over time and the volumes of stocks traded.

According to technical analysis any news about a company can be seen in the charts first and if you are adept at reading the signs then you will see which way a stock price is headed before any news is announced by the company.
Technical analysis is based on the following assumptions – prices are determined by supply and demand, supply and demand is a result of both rational and irrational behaviors, prices move in trends and these trends are generally long-lasting, changes in supply and demand can be spotted by analyzing the way the stock price behaves.

Why bother with technical analysis?

It is easier than fundamental analysis and faster.

It does not make us of company accounts and therefore cannot be manipulated by companies, it tells you what to buy and sell and when. Technical analysis based on the behavior of crowds, if people expect a certain thing to happen upon a certain signal, then they will react in a particular way when they see that signal. If enough people react in the same way then the expected outcome is achieved and the analysis becomes self-fulfilling i.e. a stock price goes up because enough people buy the stock because they expected it to go up. Many hundreds of expert analysts use technical analysis and thus influence stock prices by reacting to the same signals.

There are many indicators that are used in technical analysis, but one of the principal indicators is the 200 day moving average. If a stock falls below its 200 day moving average this is considered a bad signal and people tend to sell the stock. If a stock goes above its 200 day moving average this is generally considered a good sign and people tend to buy.

If 80% of stocks in the stock market are above their 200-day moving averages, this is considered to be overbought and so people tend to sell the market. If less than 20% of stocks are above their 200-day moving averages, this is considered to be oversold and a signal to buy.

There are many other indicators used in technical analysis such as the relative strength index, Bollinger bands etc… and any online stock trading site will allow you to include them automatically on any charts you may wish to look at, you don’t need to work them out yourself. A study of all the different indicators is probably not necessary but if you are serious about investing or trading the stock market you will certainly need to learn about the main indicators.

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Understanding Stock Trading Technical Analysis Tutorial w/ the Zecco Zirens


Zecco, which provides low cost stock and options trades through Zecco Trading, has created a series of short video tutorials to help improve your basic understanding of stock trading. This video covers technical stock analysis, including technical indicators, investing education, using technical indicators like MACD, volume, and stochastic.

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Technical Analysis Indicators

Technical Analysis Indicators

I have already written a lot about different aspects of technical analysis. Still, I would like to come back to this one of the most popular topics among traders and discuss other types of analysis traders are relying upon.

When it comes to the making a trading decision whether to buy or sell something many traders are relying on results from the various technical studies. When it comes to technical analysis, all indicators could be divided into two big categories: a) the indicators that are calculated from the price, volume, advance/decline and other quotes, and b) the indicators that you draw on the charts by yourself based on what you see on the charts.

The fist category of indicators (that are derived from the calculations based on the quotes) is quite wide and by itself could be divided into various categories such as price studies, volume, studies, advance / decline or Breadth studies, volatility studies, and etc. One of the most important elements of the majority of these studies is moving averages. The moving averages are widely used and many technical indicators are based on the moving averages (MACD, Percentage Volume Oscillator, and etc). The other studies are using moving average to smooth fluctuation and volatility of choppy lines and filter frequent signals.

The second category is more visual and does not involve a lot of calculation but rather visual analysis of the price, volume and other indicators patterns. One of the basic and most used drawing tools in technical analysis is trend lines. Trend lines are often used to mark trends and patters, price movement channels, monitor, price break out from the patters. The other elements of drawings are based on the series of vertical and horizontal lines, fans, arks, and etc. The big attention in charts analytical drawing is given to the row of Fibonacci drawings. Fibonacci lines, arks and fans are quite popular in technical analysis and many traders are using them in Elliot Wave technical analysis and other types of analysis to highlight important price levels a time periods when price trend is predisposed to change its direction.

It is difficult to compare these two categories of indicators as each of them serves the different purpose. While second category is more limited it allows a trader to catch and highlight trend pattern which is very important in technical analysis. So far, even in our age of computerized calculation human visual analysis of price patterns is still unbeatable.

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