As a forex trader, you may have thought of several ways you can enter and exit a trade at the right time to make a profit, right? One of those ways is forex technical analysis. Forex technical analysis is viral among market players and can be done using charts and trading indicators. Even if you are new to this field, this article will clear all your doubts about forex technical analysis and how it can help you predict market trends.

Forex technical analysis for beginners

Technical analysis helps analyze market price movements through historical charts and indicators so that traders can learn about future market trends. It uses past trends to forecast future trends and market performance before going into a trade. Additionally, numerous candlestick patterns or charts assist form indicators. A forex trader mainly uses price and volume data in technical analysis.

The difference between fundamental and technical analysis lies in the fact that while fundamental analysis considers economic changes and related aspects as the main contributor, the technical analysis considers past trends. A trader should know the basics of technical and fundamental analysis to be able to take advantage of combining them.

Benefits of using technical analysis

Technical analysis is an excellent risk management tool to prevent downside risks. By understanding the principles and various concepts of forex technical analysis, traders can develop their appropriate strategies for trading different currencies. Unlike fundamental analysis, which helps to derive the intrinsic value of the market, technical analysis helps to find trends and patterns caused by fundamental changes.

There are three main benefits of implementing technical analysis in forex trading:

• It can be used as an indicator to enter and exit the market.
• It can be used in any market period.
• It helps to identify market trends.

Forex Technical Analysis Tool - Charts

Historical charts are extremelyeffective in forex technical analysis. A chart consists of two things, the past and current market price, which is the starting point for deciding how profitable trading can be. The market price is the most significant representation of the market and therefore has the most importance.

Technical charts can help derive the overall market trend by deciding whether the market would soar or plunge on any time frame, including hourly, daily, weekly, or even monthly frames. Prices are monitored on various candlestick patterns (e.g., cup and handle pattern) or charts, known as price ranges. The most commonly used charts in current times are bar charts, candlestick charts, and line charts.

A technical chart has four main points: the opening price, the closing price, the high point, and the low point. The relationship between the prices and the pattern can give traders signals to enter and exit trades. By understanding the basics of forex technical analysis, beginners can implement and combine charts and indicators to forecast the future.