In order to survive in the foreign exchange market, forex chart analysis plays a significant role. It enables the traders to determine the trends in the market, make informed choices and to achieve their potential profits to the maximum. Forex charts may be analyzed with different techniques and each of them has its strengths.
Essential chart analysis techniques that every trader should know
Why forex chart analysis is important for traders
The forex chart analysis (โปรแกรมวิเคราะห์ กราฟ forex) helps traders to be aware of the past movements of the price and future trend in the market. The traders are able to know the possible entry and exit points of their trades through chart patterns of the market. Trendlines, RSI, MACD, and Fibonacci retracement can help improve the trends forecasting capability and decision-making of a trader as the technical indicators are useful in improving the profitability of the positions of a trader in the market.
Using trendlines in forex chart analysis
One of the easiest but the most effective tools of forex chart analysis is trendlines. They guide the traders and allow them to see in which way the market goes and predict the future changes in prices. An example of the use of trendlines is the following:
- Identify market direction: Trendlines assist traders to view whether the market is on an uptrend, down trend or flat.
- Mark entry and exit points: Trendlines enable traders to find the points they can use either to enter or pull out of the market.
- Confirm trends: Trendlines confirm the strength of a trend when the prices repeatedly touch the trendline.
The relative strength index (RSI)
Relative Strength Index (RSI) is among the momentum oscillators which show how fast and in which direction the price is moving. It provides information on whether an asset is becoming overbought or oversold. Here’s how the RSI can help:
- Identify overbought and oversold conditions: When it is higher than 70, it is probable that the market would be overbought and when it is less than 30 then it is likely to be over sold.
- Spot divergences: The divergence between the price action and the RSI could be used as an indicator of reversals.
- Confirm trends: RSI can be used to confirm the performance of an existing trend.
- Entry and exit points: RSI is further used by traders to ascertain the prospective purchases and sales in the overbought or oversold position.
The moving average convergence divergence (MACD)
Another common trade indicator used in forex charts, also referred to as MACD. It demonstrates the dependence of two moving averages of the price of an asset. The following is the application of MACD in trading:
- Trend direction: MACD assists traders to establish the direction of the market that is either positive or negative.
- Signal crossovers: When the MACD line and the signal line cross each other, it is a typical purchase or sale indicator.
- Divergences: Divergences in the MACD as compared to the price will indicate the possibility of a reversal in trend.
Fibonacci retracement in forex chart analysis
Fibonacci retracement is an investment tool that is applied when determining possible support and resistance levels in the market. It is used to predict reversals and retracements of prices by traders. Fibonacci retracement may be used as follows:
- Key retracement levels: The key retracement ratios that traders use are 23.6, 38.2 and 50, 61.8 and 70 Fibonacci ratios.
- Entry points: The fibonacci retracement levels are typically the points at which the prices will reverse or turn back.
- Confirmation of trends: Each trader is seeking price action confirmation at the Fibonacci levels before they enter into the trades.
Summary
Forex chart analysis can make an excellent way of improving your trade success. The trendline, the RSI, the MACD, and the Fibonacci retracement can be used to comprehend the situation better in the market, to draw the possible entry and the exit zones, and make more informed decisions. These are among the methods that must be part of your trading methods so as to have a sound analysis of the forex market.