Forex technical analysis is the process of examining past price data and market trends to forecast how a specific financial instrument will perform in the future. By understanding how markets globally are moving, traders can make more informed decisions on when to enter or exit with their own capital in order for them to profit from movements of the market. This article looks at what Forex technical analysis is, what it entails and some examples of trading instruments that are traded on Forex markets. It also provides a brief glossary of terms used throughout this article.
An understanding of technical analysis is essential to traders who want to accurately forecast price movements in any one financial market.
While some traders may be intimidated by the thought of learning to read charts, it is actually a fairly simple approach that allows you to help predict the future of any financial market or instrument. The technical analysis begins with studying a chart’s security and news announcements in order to predict what might happen next.
Technical analysts
It examines charts daily for patterns that appear on each chart. An example pattern might be the formation of a cup and handle pattern or channel on a daily chart, which can signal a change in trend direction or that further price movement is imminent.
Given the wealth of Forex news available online and through television, it is advisable to review the news stories that affect a specific market before entering into a trading position. Remember that most traders will not start a new position until they have gained an understanding of how the story is likely to affect the market. Sun, 15 Nov 2012 00:00:00 GMT
For example, if you want to buy gold at $1550 USD, you would place your “buy” order in front of your price at $1550 USD – however, there’s always a chance that someone will sell their gold to you for just $1549 USD. So what you do with your order is set it above the current price instead of below it.
What is the difference between Forex trading and CFD trading?
CFDs are financial instruments that allow you to speculate on the price changes of the underlying asset. With a CFD you can trade both up, and down, which means you can short sell a stock, or long sell it, depending on your view on the market. This makes them a very flexible instrument for speculation but also very risky if not used properly.
In comparison to CFDs, Forex is a purer form of speculation as it allows traders to trade only one way – which is usually by going long (or buying) a currency pair (e.g. USD/JPY).
Traders who use their own capital and work in a brokerage house.
Who uses the “smart money” such as hedge funds, banks, or institutional investors such as pension funds, hedge/insurance/credit brokerages, etc. Trading requires considerable capital and resources to be able to do well.
Traders who look for low-risk, predictable opportunities to make consistent amounts of profit and have access to large amounts of capital (up to several tens of millions). Traders using leverage can amplify their returns based on price movement. In comparison to Forex and CFDs, spread betting is an instrument for the sheer gambler. Spread betting doesn’t allow you to use leverage and its liquidity is lower than that of Forex or CFDs.
Forex brokers on the internet
It’s important to determine whether a broker is licensed to provide Forex trading. The difference between being licensed and unlicensed is that only licensed brokers can provide you with the legal U.S. Commodity Futures Trading Commission (CFTC) license, through which you’ll be able to sell/buy futures contracts and discount brokerage accounts on foreign currencies at their own discretion.
Most Forex brokerage houses offer a range of financial instruments, either directly or indirectly, including CFDs (contracts for difference), spread betting and currency hedging (“exchange-traded notes”) as well as options on indices and securities.
Forex technical analysis
It is the process of examining past price data and market trends to forecast how a specific financial instrument will perform in the future. By understanding how markets globally are moving, traders can make more informed decisions on when to enter or exit with their own capital in order for them to profit from movements of the market. This article looks at what Forex technical analysis is, what it entails and some examples of trading instruments that are traded on Forex markets. It also provides a brief glossary of terms used throughout this article.
