Periodic repetition of previous events allows you to prepare for them, detecting a trend to return to previous positions in good time, and earning profits. The trader has a lot of tools at his disposal: support/resistance levels, ascending and descending channels. The terminal has built-in functions to draw the necessary lines on the chart of the currency pair, they can be accessed from the “Charting tools” panel.
In addition to the standard lines, tools are available:
Grid, fan, arcs, time zones, Gann Fibonacci Channel.
Fourier row
These trading “add-ons” are an attempt to mathematically predict subsequent price movements based on technical analysis of previous market trend dynamics. The use of channel tools allows you to trade at moments of price reversal within a channel, taking into account the current trend. Channel lines show where a correction is most likely to occur if price moves against the trend, support/resistance lines show where a change in trend is likely to occur, the beginning of a prolonged correction. All technical analysis tools are based on mathematical calculations and are used mainly as a basis for determining the trend, and more precisely the moment to enter the market is determined by indicators.
The forex the analysis involves monitoring the components of Japanese candlesticks such as:
The body of the candle. The colour indicates the direction of price movement. By default, white is used for rising candles and black for falling candles
The size of the candle. It indicates the strength of sellers/buyers pressure. Dodgy candlesticks are encountered when the opening price is equal to the closing price.
The presence of a tail and its size. Reflects the indecisiveness of sellers/buyers in the market, which leads to price volatility around and fixed level.
Different kinds of candles form shapes, and their combination can be used to determine the current trend or an impending reversal. If there is no certainty about the H1 candle, the trader switches to lower timeframes and thus provides a more accurate Forex trading analysis. If we are talking about scalping, the opposite is true – they work mainly on lower timeframes, and the general trend is watched on higher ones.
The candlesticks also show the volatility of the currency pair. If we switch to periods of H4 and above, it will become clear in what range the price is moving this month or this week, whether there is a risk of reversal, of the market entering a long-term flat. The exact result is achieved with the help of additional tools, search for patterns and indicators. When a trader is counting on the long-term outlook, the more dynamic picture on the TF lower than H1 allows to react faster to the signals on the H4 and higher intervals.
The 10 basic patterns of technical analysis
Triangle. It is bullish, bearish and symmetrical (the latter indicates a continuation of the previous trend).
Diamond. A diamond-like pattern appears on the chart, with the tops resting on resistance/support levels.
Double Top. A reversal pattern suitable for use both as a stand-alone tool and as an additional signal.
Wedge. One of the “long-playing” patterns, it can form over a long period, which is useful for long-term trading strategies.
Triple bottom. Allows you to determine the direction of the breakdown during a flat period.
Triple top. One of the tools for determining a trend reversal point, which works in moments of consolidation.
Double bottom. Another pattern indicating a change from a downtrend to an uptrend.
Flag. Observed after news impulses, indicates its continuation along a previously determined direction.
Saucer. A figure used by long-term trading lovers.
Pennant. A pattern similar to a flag with a similar definition.
Indicators are roughly divided into several categories:
Based on the trend. Shows direction, strength of trend, probability of reversal.
Oscillators. Display a mathematical model for measuring the rate of change in the market.
Bill Williams and Volumes. Work on a 'separate theory' but have quite high efficiency in short and long term trading.
The key task of indicators is to indicate the recommended direction to enter the market (Buy or Sell orders), volatility readings to predict profits. Without them a trader will have to focus on 'simpler' signals – support/resistance levels, trend channel lines. Many trading strategies contain rules for combining readings of different indicators. When conditions appear on one of them (conditionally the main one), the trader is looking for confirmation on the other ones. And only if it coincides, the decision to open a deal is made. If not, the trader waits for the next signal of the “main” indicator.
