At a time when Forex trading has become one of the most active traded markets in the world, it is important that everyone who intends to,
Building his experience in this market is familiar with its most prominent aspects, and perhaps access to technical analysis of trading is a basis that cannot be ignored if you are aiming for a successful and profitable trading experience, and in this regard, the most prominent aspects of technical analysis can be summarized as follows:
- What is Technical Analysis?
The term technical analysis refers to what can be considered a system for predicting the direction of prices in the future trading market, and it is a tool to follow up on trading prices and volumes over time, and this is done by conducting a study of historical market data, so technical analysis is used with all trading market tools that are affected by the forces of demand and supply in the market, such as stocks, futures, the stock exchange, the currency market, and digital currencies in the digital market.
- Popular Technical Analysis Indicators
Technical analysts rely on a set of indicators that rely on historical price changes in order to determine future market trends, including:
- Relative Strength Index (RSI): This indicator follows the category of indicators known as oscillators, tracks price changes over time, and applies mathematical equations to pricing data that result in readings within a range of 0-100.
- Bollinger Bands (BB) Indicator: This indicator follows the Oscillator category as well, and is used to study market volatility and identify the most bought or sold situations, and consists of two sideways bands moving around the moving average line.
- Simple Moving Averages (SMA): The simple moving average is calculated based on the closing prices of the asset over a specific period of time.
- Exponential Moving Average (EMA): It is a modified version of the Simple Moving Average (SMA), and gives more weight to recent closing prices than older prices.
- Advantages of Technical Analysis
It can also be deduced through technical analysis indicators, as it depends mainly on quantitative data, and thus is considered to some extent an objective procedure for studying and predicting price data away from the guessing element, but it is worth noting that it is possible for the technical analyst to use and manipulate indicators in order to confirm his point of view and personal opinion, and this may be either intentionally or unconsciously in most cases.
- What about trading signals?
Trading signals are recognized based on Forex technical analysis indicators, where the most bought cases are identified when the indicator on the chart reaches levels above 70, for example, and the most selling cases when it falls below 30, in addition to helping the trader to identify the point of reversal of the price trend. What should be noted in this context is that the higher the market is characterized by trading volume and liquidity, the more effective and reliable the technical analysis will be, due to this level of market vulnerability to attempts to manipulate prices or distractions that may make technical analysis wrong, as for small trading markets such as cryptocurrency markets, for example, they are characterized by their continuous volatility, which makes the technical analysis process inaccurate.