Basic Concepts of Forex Technical Analysis

Technical analysis is an analysis that uses price patterns and technical tools in its analysis, and does not pay too much attention to economic news. The most important thing for this analysis is the movement of currency or financial assets. There are at least three basic things in technical analysis, of course apart from understanding the direction of prices, including understanding the basic technical concepts themselves, understanding trendlines, and understanding support and resistance. The explanation will be discussed below:

Understanding the Basic Concepts of Technical Analysis

Technical analysis is an analytical method applied in forex trading to predict price movements and the direction of future trends, by studying various previous supporting data. Therefore, traders are also required to learn about charts, so it will be easier to understand technical analysis better.

Understanding Trendline Concept

Trendline is one of the most important tools or applications to make it easier for traders to analyze potential profits in trading by simply drawing a line, so that traders will know support and resistance to get buying or selling opportunities quickly.

The trendline also combines various indicators to provide more accurate supporting data that is useful for traders in making the right and profitable decisions.

Understanding Support and Resistance

Support and resistance are indicators that give the best possibility of significant price movements, so it becomes very important for traders to get the best opportunities for price movements.

After understanding these three basic concepts in forex trading, then traders must learn how to do technical analysis in forex trading.

HOW TO DO TECHNICAL ANALYSIS IN FOREX TRADING

There are four ways to do technical analysis in forex trading:

Get to know the current trend

Trends are constantly changing, so it is mandatory for traders to understand and see trends in the short, medium and long term, or also study past trends. The simple concept is to follow the direction of the trend, where when the trend is up, the trader must place a buy transaction, and if the trend is down, then the best position is to sell it. By applying this concept, at least traders can get profits faster and minimize the occurrence of larger losses.

Determine Support and Resistance Levels

The basic strategy in determining the highest and lowest values ​​of a price is to connect the highest and lowest support and resistance points, so that traders can get opportunities to buy support areas and sell at resistance points.

If combined with a trend, for example, if in the first movement a trader takes a position according to an uptrend, then in the support area the trader can look for a buy position, and vice versa.

Trend Validation with Moving Average Indicator

The moving average can also be shown by looking at the moving average indicator to clarify price movements in identifying trends. Moving average indicators can also act as resistance or vice versa. If the price movement is below, the moving average turns into support. Because of its simplicity and objectivity, moving average indicators are often used as a reference in determining trends in forex trading.

Determine Stop Loss and Profit Target

The basic principle in determining losses and profits is to understand the rules of risk reward ratio, where the risk of loss or loss must not be greater than the profit target. This can be adjusted according to the volume of transactions that have been carried out. Even if the trader suffers a loss, the number of losses must remain within the acceptable tolerance limits.

There are several important notes that must be avoided when conducting technical analysis, namely do not violate the rules that have been made, and do not be too hasty in transacting, if there is no confirmed signal.

Implementing a trading strategy that has not been mastered will also be a blunder, and do not force the use of a strategy that is too complicated, which will actually be confusing. In addition, consistency is also very important, don't change the strategy too much, so that traders will have difficulty, what strategy really makes a profit. Limiting the risk of loss is also very important, so that traders will remain in control of their trading. Continue to learn and practice each strategy in trading analysis, so that traders will become more skilled.

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