March 28, 2024

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Importance of technical analysis in Forex market

Importance of Technical Analysis in Forex Market? - theforexscalpers

Forex is the world’s biggest financial platform having the most slippery paths. In trading, you have every chance to slip and fall from the way to be successful. Even Harry Potter’s magic cannot make you successful unless you do not stick to some strategies and techniques.

But without any technical analysis, we should not make any strategies and techniques. These analyses show you the market situation and position and help you to determine your strategy.  

Why technical analysis is important?

You may have known that only 10%, some say 5% traders become successful in Forex. So here in Forex, success is not a child plaything. To achieve success in this vast market, you need to own some qualities, follow some strategies, and feel the right time.

To identify the right time, you need to take help from technical analyses. Technical Analyses show you some statistics, charts, and reports analyzing the FX’s past and present and predicting the future.  

Let’s make it a bit easier. How the meteorological office forecast the weather? Very simple, they analyze the present behavior of the climate and try to match it with the past, calculate the weather cycle. Though every time the forecast may not come true, you have not any better option to follow to predict the weather. Even the US army follows the weather forecast.

The same goes for the Forex. This market is extremely dynamic. If you start trading without predicting the future market situation, you will have a massive possibility of loss. That does not mean you will not win, but the possibility of losing is greater than the possibility of winning. So, analyze the market before trading and then decide what you need to do. To learn more about technical analysis, navigate to this website and improve your basic skills.

To be successful using technical analysis, you must know about the following things.

Candlestick Charts

The Candlestick chart was first invented back in the 18th century (1860) in Japan. But USA stock exchange started using it after a century (1990). Despite being an old method, the candlestick chart is still used.

Its main feature is that it shows the report using visual presentation. So, traders, even the beginners, can easily access the result. The chart is not only easy but display obvious information well.

The Candlestick chart shows the price behavior of a particular time. Like-

  1. Open price, 
  2. High price, 
  3. Low price, and 
  4. Close price

If you can learn the above information at a specific time, you can easily predict how the future market will be. So, if you want to be successful in the Forex market, learn about the candlestick trading as it will ease the trade execution process.

To identify the trends.

Prices are not stable in the Forex market. Sometimes it goes up, and sometimes it goes down. These two are called an Uptrend and a Downtrend. If you buy a currency in an uptrend or sell it in a downtrend, you will experience loss. To avoid the loss, you have to purchase in the downtrend and sell in the uptrend.

There is also a trend that sometimes goes on, which is called the ‘sideway’ trend. When the price stays in a stable mode is called the ‘sideway’ trend. It’s better not to make any transaction during this trend.

So, identifying a trend is another technique every trader should follow if they do not want to make a loss. To improve your trading technique you may also start analyzing the data in a higher time frame. This will significantly improve your decision-making skills in trend trading techniques.

Experts use various kinds of technical analyses to examine the market, identify the price behavior, and predict the future market. Nothing will give you a clear view of the market than technical analyses. If you can use them properly, hopefully, you will become successful.