The Forex market is a place where almost everyone has every chance to make money. But do not confuse luck with a professional approach. Trader is a profession that needs to be learned. Otherwise, intuition will fail sooner or later, and a series of trades will turn into a continuous loss. That is why, as a start to your career, it is better not to waste time, but to start by studying technical market analysis. It will let you trade with awareness.
Technical analysis is a global trend in the study of price behavior, its dynamics and external signs, which is based on statistical historical data. It is important to note this trend includes a huge arsenal of tools and specific movements that allow to analyze the quotes from different angles. Its main feature is its historical recurrence, cyclicality. Thanks to it, you will not only learn how to navigate in the current situation, but also to predict the future.
Whom Technical Analysis of Graphs Suits
There are two main areas that beginners should study at the level of theory - fundamental and technical analysis.
The first is difficult, as it requires an understanding of macroeconomics, world politics and their relationship with each other. Therefore, it is logical that people with the appropriate education are inclined towards the fundamental analysis.
If you adopt technical analysis (TA), you will not need to study complex economic theory and immerse yourself in the monetary policy of each individual state or bloc. You will not need to think about how, for example, the presidential elections of any country might affect the demand for oil on the world market, and that, in turn, the quotes of a particular currency.
Unlike fundamental analysis, technical analysis assumes that the market has already taken into account all these factors in its current quotes. The price dynamics, its movement features demonstrate the psychological portrait of the bidders. Knowing what motivates the participants, the key players, it is possible to build unique trading systems.
Technical analysis is suitable for beginners not because of its simplicity, but because of its versatility. The history of its development gave birth to thousands of instruments and views on price movement. Each trader can choose something of their own, without delving into complex mathematical calculations. Regardless of your background, profession, type of character, Forex technical analysis is an effective solution for making money in the foreign exchange markets for both beginners and experienced professionals.
Trader's Work Environment
One of the main challenges in learning to work with charts can be the choice of the working environment and the object of study. For example, one of the key questions is the choice of the currency pair to be traded, the time frame and, of course, the trading terminal.
The trader adjusts all these parameters personally, depending on their goals. For example, the brokerage company NordFX provides its clients with the opportunity to trade on MetaTrader 4, the world's most popular terminal. It can be both a stationary MT4 terminal and its mobile versions, which allow you to analyze the market, open and close up to 100 trading orders at any time from anywhere in the world where there is Internet access. MetaTrader 4 has a friendly interface, a huge number of built-in useful features and is a powerful weapon in the hands of the trader. You can learn more about how MT4 works in the corresponding section on the official NordFX website.
Time Frame
A time frame is a time interval during which one candle or bar is formed. Using different intervals allows you to cut off market noises and catch global trends, moving from a shorter time frame to a larger one.
In MT4 there are 9 options for presenting quotes charts - М1, М5, М15, М30 (that is, 1 candlestick or bar corresponds to 1, 5, 15 or 30 minutes), H1, H4, D1, W1 and MN (respectively, 1 candlestick is equal to 1 hour, 4 hours, 1 day, 1 week and 1 month). Thus, by choosing the one-minute time frame, you will see on the screen how the price has changed every minute for several hours, and by choosing, for example, the MN time frame, you will see the price change over several years.
Also, you will see the so-called tick charts in MT4 which are formed not by time, but by trades. One deal has passed - one tick has formed. And there can be several such ticks even within one minute.
Each trader selects the necessary interval for themselves, depending on the desired trading activity, their trading strategy and, ultimately, temperament and discipline. The higher the timeframe, the more averaged the picture you get. Some traders , called scalpers, can open and close trades in a very short time, so they use M1, M5 time frames and tick charts. Others are guided by long-term trends, relying on charts not lower than H4 or D1.
Currency Pairs
There are a lot of recommendations as to which specific currency pairs to use when trading. Moreover, in most cases, the emphasis is on the main, so-called "major", currency pairs, consisting of the main and most liquid currencies - USD, EUR, JPY, CHF, GBP. Pairs using AUD, CAD and NZD (Australian, Canadian and New Zealand dollars) as well as CNH (Chinese yuan) are also popular.
Basically, Forex technical analysis is applicable not only to these currency pairs, but also to rarer ones, such as ZAR (South African rand), SGD (Singapore dollar) or NOK (Norwegian krone). It can also be used to forecast many other trading instruments available to clients of the NordFX brokerage company. These are cryptocurrencies (bitcoin, ethereum and many others), gold, silver, oil, shares of various large companies and leading stock indices. That is, technical analysis is a universal method that can be used to make money not only in Forex , but also in other markets - stock, commodity, cryptocurrency. However, the technical analysis tools used each time require individual settings depending on the currency pairs and time frames used in trading.
So, for example, exotic currencies and cryptocurrencies are more difficult for technical analysis, since interest in them is weaker, there are fewer transactions, and trading volumes are lower. As a result, any news or manipulation, even by a not very large speculator, can lead to sharp unpredictable jumps in quotations.
Technical Analysis Tools
Do not confuse trading tools and technical analysis tools. The first is what you trade (currencies, cryptocurrencies, stocks, etc.), while the second is what you use to analyze the market and make decisions about a particular transaction. The diversity of this area has no boundaries. Every year, many new and unique tools are invented that allow you to make more and more accurate trading decisions. At the same time, the vast majority of them can be divided into the following groups.
Graphic Tools
Using graphic tools, the trader sets out patterns on the price chart and simplifies the forecasting process. They can be based on both a complex mathematical model and ordinary geometric shapes, the main task of which is to simplify the work with chart markings. These include: lines, channels, shapes, icons. As a simple example, the graph shows a down-to-date price channel that has changed to an uptrend.
All graphical instruments, based on the Fibonacci numerical sequence (levels, arcs, extension, time zones) are commonly called the mathematical model in this analysis. This also includes developments using the methods of William Gunn (grid, line, fan, pitchfork), pitchforks of Andrews and Schiff, Eliott waves and the methods of a number of other well-known scientists and practicing traders.
With their help, you can determine the direction of the trend, possible pivot points, the depth of the rollback (correction), and form the current trading range.
