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/// Common Forex Terms: Technical Analysis

27 Jun / 2013
Author: champ Comments: 0

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Technical analysis plays a significant role in the forex market. Technical analysis is the use of the charts of the movements of currency over specific periods and identifying possible future trends. However, you should take into account several important considerations when you develop a forex trading system based on technical analysis.

There are dozens of technical trading tools such as moving averages (MA), moving averages convergence divergence (MACD), Bollinger bands, relative strength index (RSI), stochastic indicator (SI), on balance volume, etc. Each one of these tools has their own advantages and disadvantages. Hence, it is better to use a combination of technical analysis tools to arrive at good decisions in future trend forecasting in the forex market. Usually, a mix of moving averages, relative strength index, stochastic indicator, and on balance volume works very well in forex trading.

However, you could also use advanced technical analysis tools like Bollinger bands, Elliot waves, head and shoulder patterns, Ichimoku, etc. as you progress in your knowledge of forex trading. Moreover, if you wish to make decent profits without the risk of losses in the forex market, it is advisable to trade in Swiss franc and Japanese yen, since their trends are much easier to predict through technical analysis tools.

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