Technical Analysis
The purpose of technical analysis is to identify trends and price pattens and attempt to exploit them using various technical indicators. Technical analysis is a method of forecasting the future direction of prices through the study and analysis of past data. Technical analysis ignores all the nature of the market, currency, or commodity being traded and solely relies on the charts.

Technical Indicators

Bar Charts - A bar is a graphical representation of the movement of a currency pair over time (e.g minutes, hours, days, weeks). The Left tick represents the Open price, the right tick represents the close price, and the center bar represents the trading range. From the picture below it would appear that the currency opened then went up to the high and met some resistance got sold of down to the low where it met some support and closed below the open price.





 











Candlestick Charts - Candlestick charts were created in the 1700's and were used to predict the prices of rice. They operate the same way as the Bar Charts but a box is drawn around the open and close prices. If the box is white or green it means that the close price was higher than the open price, if the box is black or red then the open price was higher than the close price.

The thin likes at the top and bottom of the charts are called the wicks and depending on how long they are you can determine whether it is a good time to enter a trade. You can combine the candlestick charts with other technical analysis to generate entry and exit signals for your trading.














Fibonacci Retracements - After a significant price movement up or down prices often retrace and support/resistance levels often occur at or near the Fibonacci retracement levels. These levels generally occur at 23.6%, 38.2%, 50% or 61.8% of the previous move and if these levels are broken this could mean an entry signal.


































MACD - Moving Average Convergence/Divergence was created in the 1960's and is considered a lagging indicator. since the emergence of computerized analysis this indicator has become highly unreliable and most strategies do not recommend using it anymore.


Moving Averages- the moving average is used to smooth out the price data usually just relying on the close prices over a time period. Signals can be generated by the currency price crossing over the moving average line.

• If a currency crosses above the moving average it can be taken as a buy signal.
• If a currency crosses below the moving average it can be taken as a sell signal.

There are a number of moving averages, these are the simple moving average, exponential moving average (EMA), and the weighted moving average (WMA). The weighted moving average is good because the most recent data has a higher weighting. But find what best works for you.

RSI - Relative Strength Index is a number between 0 and 100 with 50 being neutral. Buy and Sell signals can be generated by looking at positive and negative divergences between the RSI and the underlying currency pair. Generally a reading of above 50 means the average gain is higher than the average loss, and a reading below 50 is the average loss is greater than the average gain.

When the RSI crosses above the line it represents an over bought position and the currency pair will likely fall in value. if it crosses below the line it mean the currency pair is likely in an over sold position and it likely to rise in value. If the currency pair is trading within the range it is relatively neutral.