Forex Technical Analysis Strategies

cfds are complex

Very often we hear about liquidity or the lack of it, during crises. Previously, we published an article where we explained the development and workings of the Elliot Wave Theory. In this article, we will explain how to successfully trade with the Elliot Wave Theory . ‘Head and Shoulders’ is one of many recognizable and tradable chart patterns. They consist of a high peak in the middle and two double peaks on either side of that one as can be seen in the illustration below.


USD/JPY Forecast: Continues to Power Higher –

USD/JPY Forecast: Continues to Power Higher.

Posted: Wed, 01 Mar 2023 14:47:38 GMT [source]

Technical analysis assumes all available information is already factored into the price of an asset. Consequently, studying the price action of an asset is therefore enough to understand what’s going on with the market participants, and there is no need to assess the individual risk factors. Risk management focuses on consistent growth and understands that trading the forex market is a marathon and not a sprint. We must be disciplined with our risk management and follow our rules every single day of our life. If the pin bar is well-formed and occurred at a key level, then it is essential to check if the market has tested the entire area.

Price patterns

Conducting technical analysis as weekend analysis can be extremely helpful because it allows you to zoom out and focus on the “big picture” at a time when most markets are closed. By understanding before the markets open for the week where prices may go, you can be prepared to make much better decisions when crucial moments arrive. Many forex traders have limited funds or time which can be seen as an obstacle.

AUD/USD Forecast: Testing a Critical Level –

AUD/USD Forecast: Testing a Critical Level.

Posted: Wed, 01 Mar 2023 10:19:20 GMT [source]

However, identifying trends is not always straightforward because prices rarely move in straight lines. Instead, they move in a series of highs and lows and it is the overall direction of these highs and lows which establish a trend. There are several types of technical analysis you can apply to the Forex markets, all of which have specific strengths and weaknesses. However, the best type of technical analysis for a trader will consider their psychology, risk tolerance, and ability to recognize the attitude of the market. There is no “one-size-fits-all” type of technical analysis, so testing systems and indicators that you are interested in and seeing how it works is the only way to find your best path. The biggest win you can get from technical analysis is to understand which direction a market is more likely to move in over the longer term.

Swing Trading

When in doubt, stick to the basics and trade with the trend to keep the odds on your side. As you choose which strategy to pursue, it’s important to take experience and circumstance into account. If you’re just starting out in forex, day-trading strategies that demand quick action and require you to manage multiple trades at a time may not be ideal learning environments. Instead, opt for a more straightforward, long-term strategy that will give you the time you need to learn technical analysis, practice smart money management, and reflect on your performance.


They are created by calculating the standard deviation from a given SMA line. When the bands widen, this is an indication that the market has become more volatile. A Bollinger Band will have an upper and lower threshold above and below the SMA line. The SMA line is sometimes referred to as the ‘middle’ Bollinger Band. You can use your knowledge and risk appetite as a measure to decide which of these trading indicators best suit your strategy.

Relative Strength Index (RSI)

Many traders who’re failing think that the only reason they are losing is because of their trades. In fact, most of those trades are pretty good at analyzing charts, but they’re not good at following the fundamental rules like risk management and using the ideal lot size. A pin bar pattern formed at the support and resistance level is most likely to work the best and confirms a strong reversal.

  • The first is to watch the result of news like non-farm payroll reports, interest rates, or unemployment rates.
  • So in this lesson, we’ll briefly explore the basics of technical analysis and the most important aspects you need to know to start using this trading strategy.
  • The best place to start is by studying long-term charts, such as monthly and weekly charts spanning several years, as these give a good overview.
  • Good technical analysis will tell you ‘when’, good fundamental analysis will tell you ‘why’.

The main focus of this is to eliminate the losing trades and achieve more successful trades Table 1. When it comes to trading risk management​, this is another area where a combination of the technical and fundamental approach could work. Economic news may tell you that the market’s attitude towards a certain financial asset is changing but it does not necessarily tell you when your view on the market is wrong. Using traditional chart points such as support and trend, for example, the fundamentally-biased trader can manage the risk on his revised market view if that proves ultimately to be incorrect.

The information in this site does not contain investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. Also if you want to have a better trade experience, you can use forex VPS with stable and fast internet access. The most important thing is to find a strategy that suits your personality and risk tolerance. Don’t be afraid to experiment until you find something that works for you. ATFX is a trade mark of AT Global Markets INTL LTD a company registered in Mauritius under FSC and all services in the Hashemite Kingdom of Jordan is offered through its Introducing Broker.

DivergenceThe price line may diverge from the MACD, suggesting that a trend may reverse. It’s also important that there is a psychological reaction when the price touches the trendline with the price going back up, or down. The steepness of the line should also be “normal” – not too flat, neither too steep. The overriding assumption fundamental analysts are making here is that the price will eventually revert to value. The overriding assumption fundamental analysts are making here is that price will eventually revert to value.

Technical Analysis Tools

The first is to watch the result of like non-farm payroll reports, interest rates, or unemployment rates. And with this information in hand, a trader pulls the trigger without any delay. Alternatively, a downside intersection signals that a bullish trend reversal has a greater chance to occur.

They also represent levels where prices could reverse to start a new trend, or a new movement in the main trend. These often happen when participants are undecided, which means that neither the buyers nor sellers are in control, resulting in sideways moving prices within a range or a lateral consolidation. One of the most well-known examples of a fundamental Forex trading strategy is news trading. If the price of an asset is undervalued, then a fundamental trader would probably decide to buy the asset, as they believe the price should go up.

trading strategies

Forex market is a zero-sum game, and according to statistics, around 95% of traders lose money in the Forex market and quit. Developing a dependable trading system for forex market still remains a substantial challenge for both scholars plus traders. This study employs a diverse set of tools to evolve a dependable set of trading systems based on the confluence of technical analysis methods. The system was designed and tested over five months (Jan 04, Jun 01, 2021) on the DE30 pair, and the performance was compared with the existing trading strategies.