Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.


Top Five Benefits of Technical Analysis in Currency Trading

Recommended Posts

Technical analysis in Forex market involves the use of technical indicators and charts to predict price movements of a currency. Forex traders who use technical analysis in their trading have lauded it as very effective tool in currency trading. On the flip side, traders who use fundamental analysis believe technical analysis is a no go zone. Just like there are two sides of the coin, technical analysis has its benefits as well as its limitations. In this article, we are going to expound on the benefits of technical analysis in the Forex market.


Price Movement


Technical analysis usually focuses on the movement of prices of a currency in the market. Charts are used to show how prices are moving; when the prices are trending as well as strength of those trends. Oscillators, momentum and volume indicators give a clearer scenario of the market action. Using charts you can obtain price movements details at a glance. Unlike in fundamental analysis where the fundamentalists make use of economic reports, in technical analysis this does not apply. By analyzing the movement of prices of currencies in the market, a trader can easily make a well calculated buy or sell decision to maximize his margins.


Easy to Find Trends


Looking at a moving average for example, a trader can easily tell whether the price of the currency is trending or simply stuck in a range. Whether the currency is moving up, down or sideways, a chart will easily exhibit the trend. Trends are very important to technicians (technical analysts) because a currency has a tendency of moving in the direction of a particular trend. Using charts, it is easy to establish these trends and make an informed and wise decision in your trading.


Less Time Consuming


You do not have to perform complex mathematical operations when you are using technical analysis in trading of currencies. Internet has a rich wealth of various technical indicators that can be used by a trader to make huge profits from the market as well as reliable trades. Technical analysis is thus less time consuming as compared to fundamental analysis. It is also less tedious and cost effective.


Loads of Informative Data


Technical indicators and charts provide an array of information within few moments. First and foremost, using technical analysis trends can easily be found; volatility, momentum and trading patterns easily and quickly found. There is a host of indicators in Forex market and each provides information on various aspects of currency movement. This information is of paramount importance to traders to make substantial and profitable trades.


Easy to Identify Patterns in the Market


Actions in the market tend to unmistakably and clearly repeat themselves. Using charts enables a trader whether newbie or advanced to find patterns that will help him predict price movements. Like star constellations, patterns in the currency trading can be complicated and complex but with time it becomes easier when you master the art. Some of the patterns that are commonly used in Forex market are rounding tops and bottoms, head and shoulders, double and triple tops and ascending and descending triangles. These are proven patterns that currency prices usually follows. They have very strong predictive powers in the market.


Charts essentially tell a story about the price movement of a currency. The story can be complex with various plots and twists. On the other hand, the story can be simple with only few characters and a single narrative. Technical indicators and charts can give just basic information on support and resistance or trend. They can also give deeper information on how momentum is building, strength of a trend and whether the market is developing in a favorable way for trading.


Technical analysis can make a difference between substantial and profitable trades and loss making ventures. Use them effectively and you will enjoy good tidings all year round.



Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Create New...

Important Information

By using this site, you agree to our Terms of Use.