• Wed. Jul 17th, 2024

Guide towards technical analysis of FOREX charts

Forex Education 1

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Every method of technical analysis may fail to cover a few aspects. Reporting on trendlines is not an integral part of any technical analysis. Trendlines can misguide. According to technical analysis experts, the trends are still just historical data feeds. These are suggestive and indicative: one can observe what’s happening and understand why etc., but occasionally this trending data is not evaluated for various reasons.

Traders like to know the risks and currency trading trends shortly to perfect executions to time their exchanges correctly. That helps traders maximize their profits, and brokers hedge against the top traders. It also helps make a particular currency stronger because the total amount of foreign currencies exchanged on a particular day can then stretch the capacity of the currency to take it to a better-valued position.

However, traders believe they also need proper support and resistance figures. These figures help assess risks and are available only from performing varying degrees of technical analysis.

The above chart helps as it highlights the upper and lower trading marks. However, unless something drastic happens in the socio-economic climate, the charts are unlikely to go beyond the normal trading range in a short period like this.

Also, for a particular day or week, traders can procure knowledge regarding the safe limits of various currency pairs through these small batches of technical analysis. As a result, if you are using only fundamental analysis, you might be able to sell and buy at the right moments, but holding on to a currency can be risky without knowing the support and resistance values detailed above.

These values are calculated using some simple formulae. Technical analysis makes it easy to determine the pivot value of one currency against another. Whilst estimating the currency’s performance over the next day or week, analysts and Money managers in Forex trading companies can also provide the likely upper and lower limits of the chart. The upper value is called the resistance price, which may be calculated in several ways to provide 2-3 possibilities. The same goes for the lower value, called the support price of one currency against the other.

The simple formulae are:

Pivot = (High + Low + Close) divided by 3; or [H + L + C + Open (O)] divided by 4

R1 = (P x 2) – L (Resistance 1)

R2 = P + (H – L)

S1 = (P x 2) – H (Support 1)

S2 = P – (H – L)

Here you can understand how 1, 2 and 3 mark the resistance parts of the chart, and the remaining serial numbers denote the support levels.

Suppose you are interested in a complete picture of any pair of FOREX currencies. In that case, you must know the risk levels, probable trends and important ratios such as PMI and PPI equivalents. These will undoubtedly help you understand nearly all the chart movements shortly. You need to look at forecasts from sources that use fundamental and technical analyses with a balanced approach.

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