1.) Trend charts and price ranges of the markets
Use long-term charts to decide between trending or fluctuating markets. The analysis starts with daily, weekly, monthly and even multi-year charts. A large-scale chart essentially shows the life of the market and provides a much clearer picture of long-term market sentiment.
Once you’ve drawn the long-term set, you can draw some short-term graphs. Remember that the luck factor in Forex is much higher between shorter timeframes on a chart. It is best to trade in the same direction as the medium and long-term trends, even if you are only trading on a very short timeframe. If there is a strong and defined trend, it is necessary to move on to other types of strategies.
2.) Follow the trend
Once established, you only need to open positions in the direction of the trend. Market trends can be long, medium or short term. You must first decide what kind of strategy you want to follow: long-term or shorter-term. This decision will determine the type of graphics to use. But the strategy will always follow the trend.
If there is an upward trend, setbacks are expected in the purchase price of a pair, to ensure a good entry price. In the event of a downtrend, wait for a recovery in price before selling the coins. Market trends can be long, medium or short term.
3.) Locating support and resistance levels
Find support and resistance levels. It is best to buy near support levels and sell near resistance levels. The resistance level is usually a peak above the previous high. When resistance is finally broken, it automatically becomes support. Also, when a support is finally defeated, it turns into resistance.
4.) Rollbacks and Corrections
Generally, the market correction, up or down, executes a significant part of the previous trend. Corrections can be measured in an existing trend in simple percentages. A fifty percent trail above the trend is the most common. The 38% and 62% Fibonacci retracements are also two of the highest levels followed by Forex investors, including major players such as banks or financial institutions.
5.) Trend lines
One of the simplest and most effective charting tools are trend lines. Draw a straight line connecting two points on the graph. If the trend is up, a line is drawn below connecting two or more low points.
If the trend is down, a line is drawn on the chart that also connects two or more high points. Prices often respect these trend lines when they get close to them. When a trend line breaks, it is often an indication of a change in the mainstream.
6.) Moving Averages
Moving averages often provide signals to buy and sell, so this is important to keep in mind. With the help of moving averages, it is possible to determine the state of a current trend.
One of the most common ways to use moving averages is to use two different averages on the same chart and wait for the averages to cross over. If, for example, we have an uptrend and prices were in a correction, at the time a faster moving average (eg 10 days) crosses above a slower moving average (eg 20 days) It’s probably a good buy. .
7.) Oscillators
These help us identify markets that are overbought or oversold. While moving averages provide confirmation of the market trend, oscillators can often indicate the right time to open a trade.
Two of the most common oscillators are the relative strength index (RSI) and the stochastic. The two oscillators operate on a scale from 0 to 100. When the RSI is above 70, there is an effect on buying, and when it is below 30, it indicates that there is no overbooking. The overbought/oversold stochastic values are 80 and 20.
One of the most useful signals provided by oscillators are the famous divergences. A divergence occurs when the direction of the oscillator signal differs from the direction of the same price. Such situations are usually a strong indication of a change in the market trend.
8.) Moving Average Convergence-Divergence
The moving average convergence divergence (MACD) combines a moving average crossover with an overbought/oversold oscillator of moving elements. A buy signal occurs when the faster line crosses above the slower line, both of which are below zero.
Conversely, a sell signal occurs when the faster line crosses below the slower line, both of which are above zero.
The MACD histogram determines the difference between the two lines and gives an early warning of trend changes. This is called a histogram and it uses vertical bars to show the difference between the two lines.
9.) Average Directional Movement Rate
The Average Directional Movement Index (ADX) helps determine if a market is in a trending phase or is ranging between ranges. This tool measures the strength of a market trend or direction, but does not indicate the direction. For that you must use other indicators or tools. Generally, a reading above 25 is an indication that the market is in a strong trend, but fluctuating between ranges.
10.) Additional Training
Training in technical analysis is essential for every investor. Only you can improve and perfect yourself through practice and experience in this market. Ongoing reading and training is very important in finding successful forex strategies that work best for you. If you are new to Forex, you can find basic strategies for beginners online.
Remember that trading based on technical analysis also helps us focus on our goals and prevents forex trading from being based solely on emotion and impulse. Discipline is essential to achieving success with your forex trading strategies.
