Forex Technical Analysis Strategies


DailyForex provides you with all the tools and information you need to become a successful forex trader. Our platform offers forex trading education, advanced charting tools, financial analysis tutorials, market commentary, trade management tips, and more. RSI indicator is displayed as an oscillator, a line chart that moves between two extremes and can range from 0 to 100.


The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 75% of retail client accounts lose money when trading CFDs, with this investment provider. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.

Are there any drawbacks to using technical analysis in your forex trading strategy?

Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. She has 20+ years of experience covering personal finance, wealth management, and business news. When the Aroon Up crosses above the Aroon Down, that is the first sign of a possible trend change. If the Aroon Up hits 100 and stays relatively close to that level while the Aroon Down stays near zero, that is positive confirmation of an uptrend.

  • Channels are used to generate signals that help us identify breakout points.
  • Fundamental analysts take a long relatively long term approach to analyzing the the forex market.
  • There are multiple versions of stochastics, but the slow stochastic stands as the one that’s most commonly implemented.
  • All three lines work together to show the direction of the trend as well as the momentum of the trend.

Price channels are in fact support and resistance levels at work, so price bounces between the support and resistance levels. Being a very good technical analyst is no guarantee that you’d be a profitable trader, far from it. The application of technical analysis knowledge with sound forex money management leads to success.

Price action vs indicators vs technical analysis: what is the difference?

Many indicators do not provide added information; they are alternatives or duplicates. 71.6% of retail investor accounts lose money when trading CFDs with this provider. Please ensure you fully understand the risks involved by reading our full risk warning. The most effective way to backtest a forex trading strategy is to use a demo account.


Compared to the Forex 1-hour trading strategy, or even those with lower time-frames, there is less market noise involved with a Forex daily chart strategy. They operate as tools that are embedded in trading platforms and connected throughout in order to offer traders a different—and often more concise—perspective on the market. They can offer long- or short-term forecasts, a view into the current state of a currency pair, or a look back at historical data.

However, some of the most successful currency traders actually prefer to take a swing trading strategy. Understanding how percentage in points work – or PIPs, is also a crucial strategy. In a nutshell, when the exchange rate of a currency pairs suffer fluctuations – this is calculated in pips. Other than pairs containing the Japanese yen, most user-friendly forex trading platformswill display five digitals after the decimal. The best forex trading strategy for those that are just starting out in the world of currency speculation, is to ensure you have a firm grasp of the basics. If you don’t, you are certain to walk away from your forex endeavors at a financial loss.

Chart Patterns

Just like stochastics, the index—commonly listed as RSI—is an oscillator that is used to find conditions in the market that are oversold or overbought. This is particularly useful for traders who like to buy low and sell high, because values are plotted between zero and 100. Zero is considered oversold, whereas 100 is considered overbought. The timelines for using the stochastic oscillator sometimes extend too long for day traders and scalpers, which can limit the value of the indicator for shorter trading time frames. Stochastics are easy to understand and offer clear trading signals, making them a beneficial indicator for inexperienced traders. Moving averages—especially simple moving averages—tend to be a more stable indicator than other analysis tools.

What are support and resistance levels in forex trading? –

What are support and resistance levels in forex trading?.

Posted: Fri, 11 Nov 2022 11:31:58 GMT [source]

AvaTrade is regulated in six regions and allows you to deposit funds with a debit card or bank wire. In addition to tight spreads your chosen forex broker should also offer low commissions. In fact, the best forex brokers in the online space will charge you no commissions at all. This includes the likes of eToro and AvaTrade, which we discuss in more detail shortly. Ultimately, once you select a top-rated Copy Trading pro – you can sit back and invest in a passive nature. This means that you won’t need to spend countless hours researching the forex markets yourself.

Also, please keep in mind the time frame over which each hand is used. For example, if you use an MA to identify oversold conditions, ensure that you monitor other indicators, such as the RSI or MACD, for confirmation. The five basic technical analysis strategies are trend following, reversal trading, trend identification, support and resistance, and Fibonacci retracements. The main objective of technical analysis is to identify patterns in the market and make informed trading decisions. In momentum trading, traders use momentum swings as signals to take a position in the market. They look for signs such as price oscillation or divergence between indicators such as RSI or MACD, hoping that these signals indicate a continuation of the recent upward or downward momentum.

Market timing involves predicting when markets will move in a specific direction based on past market movements and other factors. This is usually done using financial tools such as moving averages, Bollinger bands, DEMA lines, stochastic indicators , etc. Irregular Ranges – In an irregular range, determining support and resistance areas can be difficult, but possible.


The best trading strategies require immense patience and discipline on the part of traders. It requires a good amount of knowledge regarding market fundamentals. Traders often use several different technical indicators in tandem when analyzing a security. With literally thousands of different options, traders must choose the indicators that work best for them and familiarize themselves with how they work. Traders may also combine technical indicators with more subjective forms of technical analysis, such as looking at chart patterns, to come up with trade ideas.

The forex technical analysis strategy phases

Even if the analytical method was perfect, it would still be wielded by imperfect human beings who make mistakes, have egos, and simply fail to take data into account. A good forex trader not only studies the methods of technical analysis, but also learns about their owns strengths, weaknesses, and thought processes. That way we can control ourselves and make the best possible decision for our financial future.


This means that you don’t need to understand how to read and analyze pricing charts or charts patterns. Instead, you will be entering and exiting trades based on real-world events. To do this, you’ll need to look out for crucial developments like interest rate changes, economic data (e.g. GDP levels), geopolitical events, and more. This is much more conducive for beginners – as you can take your time researching the markets and thus – you can avoid having to make quick and instant decisions.

What is the best strategy in forex?

So, they help in looking beyond transitory price effects and seeing the big picture and general trend instead. To master technical analysis is not a task that can be achieved in a few days or weeks just by studying the books and theories. What you all need is an experience of number of years to become an expert in technical analysis. This article is a small attempt to describe briefly what it all involves. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner.

  • He began his career with Drexel Burhnam Lambert and in 2004 he joined FXCM where he co-created and was a senior strategist covering G10 research.
  • Our forex trend indicator will enable you to tell whether prices are likely to increase or decrease.
  • In 2018 he joined FXStreet where he provides in-depth market analysis and live coverage of economic releases.
  • Such indicators can measure overbought or oversold conditions, relative strength, and the potential for price to continue in the same direction or reverse.
  • It represents a sharp reversal and rejection of a particular price, with the ‘wick’ or tail showing the range of price that was rejected.

Charles Dow was the person credited with being the father of technical analysis although that is probably up for debate. With candlestick patterns, at the most, it involves 1-2 candlesticks that form next to each other. There’s more to fundamental analysis than those factors listed above.

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