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Forex Technical Analysis
Forex technical analysis tries to predict price movements of currency by examining the market variables and mathematical data. This includes market participants (on the national and corporate levels), price histories, fluctuations and other trends. The forex technical analysis makes the assumption that economic trends are not randomized. Therefore, the mathematical formulas used to develop a technical analysis make the assumption that a price will move in any of three linear directions: up, down or sideways.
When a technical analysis shows that a price is trending upwards, there is an increase in the currency value and then an increase in the amount of buyers. When a price trends downwards there is the opposite impact: currency value decreases and there are more sellers. A sideways trend shows that there is little movement in the value—but that does not mean that there are no buyers or sellers of a particular currency. This is because, much like the stock market, trader perceptions create buy/sell patterns. Therefore, it is important to examine the current currency market trends, as well as the trader mentalities.
A forex technical analysis uses charting tools to graphically depict trends based on current and historical information. The technical analysis may involve, but is not dependent on, fundamental analysis characteristics, such as governance and employment of the currency’s originating nation. The main benefit of technical analysis is that it is similar to your traditional stock market analysis---it shows value patterns, trends, rises, falls, and so on. In fact, many of the charting tools used in a technical analysis, such as the candles stick, is mimicry of tools used in the stock market. So while currency trading is a relatively new market for your average trader, the mathematics and chart processes are familiar.
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Free Forex Charts
FXClub.com Tip: There are literally millions of web-based resources for free forex charts. The problem is that not all of these forex charts are reliable and accurate. It is therefore important that you check the website and research their validity in delivering charts.
FX Club offers forex trading platforms with real time forex charts and historical forex charts. FX Club is a forex brokerage firm that is registered with a national regulatory organization. The charts are free with registration on their website.
FX Street offers information on FX Club and other brokerage firms. FX Street is located at. This website allows you to browse real time forex charts and historical forex charts to gain familiarity.
Free forex charts are widely available online. This does not mean that all the information is constant or synonymous. In fact, some of the more unethical forex brokers control the dissemination of information to traders and thus control their earnings. Ethical and regulated forex brokers that offer free forex charts do not alter the charts to set a particular currency pair in their free forex charts.
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Forex Chart Analysis Basics
If you have experience in stock trading or have taken courses in graphical analysis, you are already very familiar with forex chart analysis. They function in the same manner by showing historic trends and developing future predictions. The mathematics are different, so please be aware that forex chart analysis considers both fundamental (national politics, consumer faith, gross domestic product) and technical (price moves, buy/sells) information to create a forex chart.
Brokers use forex chart analysis to deliver information to traders and investors regarding price moves, trends, and histories. In general, brokers do the analyzing and thus make recommendations. However, the final buy/sell decision and profit/loss are at the sole responsibility of the investor or trader, so it is beneficial to understand the basics of forex chart analysis.
A basic forex chart analysis will examine the time and date, the current price, and trending price. Many also allow you to change the indicators, timeline (between minutes, hours, days) and the best forex chart analysis will plot real time forex data.
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Forex Currency Charting Basics
FXClub.com Tip: Forex currency charting is a graphical representation of fundamental and/or technical indicators. There are many forms of forex currency charting, but most can be described as a line chart, bar chart or candlestick chart.
The line chart in forex currency charting is your basic graphical interpretation of exchange rate history over a period of time. Similar to stock charts, it is developed based on the daily closing prices of currency pairs.
The bar chart in forex currency charting is the standard bar graph based on price performances of a currency pair. It is compromised of vertical bars based on time intervals (minutes, hours, days). The bar chart usually represents the opening, closing, high and low exchange rates.
The candlestick chart in forex currency charting is very similar to the traditional open-high-low-close stock charts (for example, the stock charts created in Microsoft Excel). The candlestick chart shows the open-high-low-close values in small ‘bars’ that resemble candlesticks with ‘wicks’ at each end. The candlestick bar is solid when opening rates are higher than closing rates and hollow when closing rates are higher than the opening rate.
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Foreign Exchange Charts
Foreign exchange charts should include the chart period as a time interval, such as 30 minutes, 24 hours, five days. The foreign exchange charts should give the specific currency pair, such as GPB/USD.
The foreign exchange charts will exemplify strong or weak moves based on the value differentiations in the currency pairs. They will also show the relationship between the two monetary units of a currency pair. This is basically summed up as the price activity where the current value of the base currency pair is placed against the second currency pair. This allows an investor to see the changes in the value of the currency pair, and is often used to determine the bid/ask prices.
Many charts will also show moving averages as lines of different colors over a period of 10 or more days.
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Forex Currency Trade
FXClub.com Tip: The Forex market is nowhere and everywhere. There is no central place where market players execute trades. Instead, Forex is comprised of currency transactions between banks, investment funds, Forex brokers and traders. Currency supply and demand and investors' expectations determine the market price of a currency. Some currencies also come under significant influence from central banks. The Forex market is a virtual market, which means that it is not followed by a physical delivery of currency.
Forex trading is the exchange of two currencies as currency pairs. The founding idea of forex trading is relatively simple. One monetary unit is worth a certain amount against a secondary monetary unit. At first glance, it seems unlikely to make/lose any profit trading money. The value of the profit is not in the currency trade, but in the ups and downs that occur in the value of currency trade. For example, one day the GPB (British pound) is worth 1.89 USD. The next day, it is worth 1.99 and the next week it may be worth 2.1, or follow a depreciating trend.
The value of the currency trade and the buy/ask prices therefore change, and money is earned or lost based on that currency trade value. The value of the currency trade is based on fundamental and technical analysis of the currency unit and the nation from which the currency comes. This is the world economy, and it is vast with many variables. The ability to gain foresight into how a currency unit will trend and trade accordingly will maximize profits. The lack of foresight in the world economy, national economy, and currency value (rather than price) can lose profits.
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Reading Forex Currency Charts
Forex currency charts are interpreted in the same manner you read traditional stock, value, price, or any other chart. There is little difference in the way one reads a forex currency chart to the way one reads any other chart. The main differences are that forex currency charts often have smaller time intervals and may be compromised of more technical or fundamental indicators.
In forex currency charts, there are historical forex charts and real time forex charts. Most broker companies will offer both types of charts. Historical forex charts should be read with the goal to interpret trends of currency pairs. Real time forex charts are charts that are constantly being updated based on the most current information available in currency pairs.
Forex currency charts are not a stretch from traditional charts, but they do require a fair amount of understanding of the technical and fundamental analysis that are used to create the charts and make predictions of future value.
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Currency Trading Decisions
FXClub.com Tip: Forex chart analysis help with currency trading decisions by helping brokers and traders forecast price and value movements. This way, they are able to stay ahead of the market. The way in which charts help with currency trading decisions is highly based on the type of investor you are. The technical analysis charts, such as those found at FX Club, can help investors provide targeted predictions and reactive possibilities of the currency trading values and price movements. Fundamental analysis is also helpful for currency trading. Fundamental analysis shows the status of a country, such as political or consumer problems, rather than the specific value of the currency. In either case, it simply boils down to examining the charts and reacting through currency trading decisions.
The best advice for a novice trader or novice chart analyst is to examine both fundamental indicators and technical indicators. Fundamental analysis charts are sometimes easier for the novice trader to understand because they include traditional economic indicators, like gross domestic product and consumer price indices. The technical analysis can be a bit more confusing in making currency trading decisions. Technical analysis is also more beneficial towards currency trading decisions. This is because the technical analysis examines the specific values, fluctuations, price changes, and so forth of a particular currency unit or currency pair.
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