Real-time technical analysis of the foreign exchange market: basics and tools

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Real-time technical analysis of the foreign exchange market is one of the most effective ways of market research. It is a prediction of the price movement of an asset based on an analysis of past movements. The technique allows you to track fluctuations in the course in the past and, taking into account the data obtained, determine where the chart will go - north or south. The peculiarity of the technique lies in the fact that the price is studied solely on the basis of its movement. A comprehensive technical analysis of the currency market does not include an assessment of the fundamental factors that could cause quotes to move in a certain direction.

Basics of technical analysis

The basis of technical analysis is a tandem of interrelated activities that allow you to determine the subsequent movement of the trend with maximum accuracy. The use of one tool within the technique, in particular one of the indicators or only support and resistance lines, is not effective. Comparing data across multiple instrumentsallows you to make the most accurate forecast. The assessment of the market situation is based on several parameters, such as price changes, the volume of transactions, the number of open positions. The price always remains the dominant parameter for evaluating the market movement, the other values considered only complete the picture and confirm the forecast made.

Basic principles of analysis

Real-time technical analysis of the foreign exchange market is based on three main principles that not only a professional, but also a novice trader should know:

• The currency market takes into account absolutely everything in its movement. The price chart reflects political and economic factors. For example, the lifting of EU sanctions against Iran on the supply of oil to the international market or the payment of EU debt by Greece can be attributed to the most powerful stimulators of currency movements.
• Trends are systematically repeated. From time to time, the price will draw identical figures, which are called patterns. This is due to the fact that, despite the changing situation in the world, the psychological factor never changes, and traders in most cases use patterns of behavior in the market. To say more, traders are used to reacting to certain news in the same way. Knowing the reactions of market participants, you can open and close positions in a timely manner.
• At the heart of any movement is a trend. Technical analysis of the foreign exchange market in real time is simply impossible without determining the main trend in the market. If inchaos reigned within its framework, there was no question of any forecasting, and even more so of making money through speculation on prices.

Basic concepts in technology

Technical analysis of the foreign exchange market in real time is based on the basic concepts. It is impossible to start analyzing the situation if you do not understand trends. There are three market movement formats in total:

• Bullish trend (or uptrend) - the price is heading up.
• Downtrend (or bearish trend) – the price is going down.
• A side trend (or flat) is a period of stagnation in the market, a certain moment of uncertainty. The price is moving in a narrow price range, and market participants are only thinking about which way they should open positions.

Please note that each trend in its purest form is a rarity in the market. Any movement of quotes is accompanied by rollbacks. Beginners are advised to trade only with pronounced trends. Even professionals are wary of flat market conditions, as likely profits are not justified by high risks.

Technical analysis tools

The technical analysis tools can be:

• bar charts;
• indicators;
• oscillators;
• channels;
• waves;
• graphic shapes.

Each of the tools has certain advantages. A detailed understanding of each functionality will allowanalyze the situation and make the right decision. You should not be guided by only one instrument, as its signal for the transaction may be false. Another thing is when several instruments show identical signals at the same time, which opens up wide prospects for making money. Previously, technical analysis tools were not automated, as they are today. In order to analyze the situation, it was necessary to draw graphs by hand and carry out calculations. So learning each tool is not that difficult, but essential.

Technical analysis patterns are the most reliable patterns

In the framework of technical analysis, there are well-established patterns that are determined by the patterns of behavior of both large market participants and small ones. They are embodied in the format of certain graphic figures. An example is a flag and a double top, a triple bottom and a head - shoulders. As soon as the figure emerges on the chart, and the price passes a certain line, we can confidently talk about the further direction of movement.

What do the figures say and why are they needed?

Note that there are patterns of trend continuation and trend reversal. The frequency of occurrence of such patterns on the chart is different depending on the time period and on the traded instrument (currency pair). The percentage of working out of such patterns can be from 80% and above. It is not enough to understand the theory. Technical analysis of the online currency market based on graphical figures should be accompanied by practice. Onlytrading for a long time, you can learn to see patterns and use them to your advantage. In practice, any figures will not have such a clear and concise look as in the pictures.

Advantages of technology

Technical analysis of the Forex currency market is the foundation of the basics, with which every beginner's acquaintance with the foreign exchange market begins. Experienced players use the technique as a tool to analyze the behavior of beginners. So, inexperienced traders often make decisions based only on emerging support and resistance lines. Knowing this, major players can predict the direction of movement due to the mass nature of the solution, which allows them to occupy the most advantageous positions. It is not for nothing that there are statistics according to which only a few percent of participants earn in the foreign exchange market. There is even a theory that, acting contrary to the signals of technology, you can get a solid income, but many will begin to dispute this question.

Understanding technical analysis is a step towards successful trading

The basics of technical analysis of the currency market, although they are basic, cannot serve as the only tool for building your trading strategy. Effective trading happens only when, in addition to the technique, fundamental analysis and computer analysis are used. You should not use all the tools of the technique at the same time, as this will only overload the chart and lead to confusion in the signals. Experts recommend that beginners study in detail one instrument at a time.each type of market analysis, depending on the most appropriate trading format. This approach will avoid losses and losses, will bring good trading results.