Technical Analysis Basics for Forex

Technical analysis basics are a good starting point in learning how to trade currencies with care.

Technical analysis is one of the two methods of analysis used for forecasting the movements in foreign currency trading. The other method is fundamental analysis, which uses the economic and political data of a country to predict its currency movements.

Foreign currency traders consider fundamental analysis as difficult because it requires them to have considerable knowledge of economic and political data, in addition to an expertise in interpreting the data. On the other hand, technical analysis uses historical data to predict a currency’s movements.

Technical Analysis Basics for Forex

Technical analysis uses several tools such as charts to study and predict the foreign exchange market’s movements and trends. Before you can start to develop and implement this kind of analysis, you should first learn the basics.

Technical analysis basically involves three principals. The three principals are market price, chart patterns, and concept of trend. Study more about technical analysis of forex.

Here is a basic description of the three principals:

  1. Market action– A price chart is the tool used to predict the future trends in a currency’s price. This principal explains that a currency’s price is the result of the market changes in the law of supply and demand. Changes in the economic, political, and psychological factors of a country will influence the price of a currency. The changes in the price charts are the result of the foreign exchange traders’ reactions to those factors.
  2. Chart patterns– This consists of market patterns reflecting a currency’s optimistic prospects of rising prices or pessimistic prospects of falling prices within a period of time. The reactions of foreign exchange traders to changes in supply and demand are the main influence affecting the market patterns.
  3. Concept of trend– This principal explains that market prices are the main influence of a trend, whether it goes in an upward, downward or sideway trend. A technical analyst will monitor the price actions in the market to identify the trends in the early stages of their development. The analyst will continue to chart the trends until they will show signs of reversal.

Another important component of technical analysis is the tools used to predict the movements and trends. A commonly used tool is the chart – which can be a line chart, bar chart, or a candlestick chart.

Here are brief descriptions of each:

  1. Line chart– This chart plots the price of a currency for a period of time, which can be daily, weekly, monthly, and yearly. A line chart’s only disadvantage is its inability to report price gaps.
  2. Bar chart – This chart consists of four important price points: the top point, the low point, the opening price, and the closing price.

Do Forex Expert Advisors Work?

Do you know what forex Expert Advisors (EAs) are?

How do they work, and why do traders need them?

To start with, Forex Expert Advisors are automated robots programmed to detect trade entry and exit opportunities based on a certain set of parameters. This is a mechanical trading system that automatically manages all trading operations.  They are also known as “forex trading robots”, “EA”s, “MT-4 EA”s, or “automated forex trading software’s”.

Forex expert advisors are built not only to automate trading operations, but also to generate profits while doing so. Even with this invention, the types of forex expert advisors vary largely. News, breakout, hedge, scalper, and adaptive expert advisors are among the types available in the market. Some are designed to trade at certain times only while others may be made such that they trade round-the-clock. There is even custom-made EAs that expert traders have asked programmers to automate their tried-and-tested manual trading systems.

Do Forex Expert Advisors Work

How do these forex expert advisors work? EAs use technical indicators to assess the foreign exchange market’s conditions and take appropriate action, as dictated in its source code. Browse more:

A basic MT-4 expert advisor is made up of three parts:  a startup function, a main function and a cleanup function. Upon startup, the expert advisor will run through the startup function once. It will also run through the cleanup function once at the end. Prior to closing, the EA will run through a cycle of its main function with every incoming tick. This goes on for as long as the EA is attached to a trading chart and is active. However, a new cycle will not start for a new tick if the EA is still processing a previous cycle.

So, do expert advisors really work?

Some traders are critical about it while some welcome the extra hand. Certain traders believe manual trading is better because the forex market is too complicated and unpredictable to be automated. Others see EAs as beneficial in the areas of decision-making and income generation.  Because every forex expert advisor has a trading plan with which it adheres to indefinitely, it has the ability to decide without being influenced by external human factors, such as stress and emotions.

EAs are also capable of making trading decisions while taking into consideration the different factors that influence prices, which make them valuable trading tools. Also, EAs bring in additional income while the trader sits back and relaxes. EAs can run on autopilot and they will continue to trade in the same patterns that they have been designed to trade with. Study more about Forex trading…

Given the number of EAs available in the market today, you should be a smart shopper. Do research on what you need for your trading style. Then, look for reputable sellers, compare, send queries, and ask them to provide live forward test statements. Once you have your choices, check the software and test run the system.