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Technical Analysis |
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Forex traders use different methods to predict price changes and future trends. One of these methods is called technical analysis. It is so named because the technical analyst uses charted data of past market action to predict how and when trends will develop. The data includes past prices and the volume of trading. This historical information becomes the analyst’s guide for future trading decisions.
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Bar Charts |
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Financial analysts often present data to be analyzed pictorially in the form of a graph. One commonly used type of graph is a bar chart. A bar chart represents different values by using rectangular bars. The bars can be placed either horizontally or vertically.
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Forex Charts |
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Forex traders use graphs to analyze data because the format makes it easy to see the implications of what is presented. On a graph, the vertical axis represents the price and the horizontal axis represents the time.
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Reversal Figures. Head and Shoulders |
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There are three major reversal patterns in Forex trading that have been identified as creating a significant trend reversal when they occur. The fist of these is called the “Head and Shoulders” because when it is charted it bears some resemblance to the head and shoulders of the human body.
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Trend Indicators |
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A trend occurs when the price of a stock continues to rise or fall over a period of time. A trend indicator is a calculation that uses statistical methodologies like average and rate of change to help track that movement while defining moments when the trend is either simultaneously reversing or where it may reverse in the future. The objective is to identify a change in the market trend as soon as possible. Trend indicators are used to chart price direction developing in the medium to long-term.
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Elliot Wave Theory |
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Ralph Nelson Elliot was a successful accountant and financial advisor to a number of railroad companies. After the market crash of 1929, Elliot began to devise the formula that bears his name.
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Gaps |
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When traders refer to a "gap" they mean that the height of consecutive bars on a chart is not level. Level bars indicate a price overlap. If the first bar's low is above the second bar's high, then the second currency price gaps lower. If the first bar's high is lower than the second bar's low, then the second currency price gaps higher.
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History