This Article will outline the technical analysis and fundamental analysis used by professional forex traders to land huge profits in forex trading. This Article provides insight into the two major methods of analysis used to forecast the behavior of the forex market. This is also a follow up from Forex Patterns and Forecast Methods Used Today For Successful Forex Trading! Part 1
, if you have not read part 1 please do so to bring yourself up to speed.
Technical analysis and fundamental analysis differ greatly, but both can be useful forecasting tools for the forex trader. They have the same goal - to predict a price or movement. The technician studies the effects, while the fundamentalist studies the cause of the forex market movements. Many successful traders combine a mixture of both approaches for superior results.
: If both fundamental analysis and technical analysis point to the same direction, your chances for profitable trading are much better.
So let us begin with where we left off on the technical analysis:
– Are used to emphasize the direction of a trend and to smooth out price and volume fluctuations, or “noise”, that can confuse interpretation. There are seven different types of moving averages:
- Simple (arithmetic)
- Time series
- Volume adjusted
The only significant difference between the various types of moving averages is the weight assigned to the most recent data. For example, a simple (arithmetic) moving average is calculated by adding the closing price of the instrument for a number of periods, then dividing this total by the number of times.
The most popular method of interpreting a moving average is to compare the relationship between a moving average of the instrument’s closing price, and the instrument’s closing price itself.
: when the instrument’s price falls below its moving average
: when the instrument’s price rises above its moving average
The other technique is called the double crossover, which uses short-term and long-term averages. Typically, upward momentum is confirmed when a short-term average (15 –day) crosses above a longer-term average (50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
MACD – Moving Average Convergence/Divergence
– A technical indicator, developed by Gerals Appel, used to detect swings in the price of financial instruments. The MACD is computed using two exponentially smoothed moving averages of the... To get full story click => Forex Patterns and Forecast Methods Used Today For Successful Forex Trading! Part 2