While technical analysis is focused on the study and past performance of market action, Forex fundamental analysis focusses on the fundamental reasons that make an influence on the market direction.
Using Multiple Time Frame Analysis suggests following a certain security price over different time frames. It is a very useful strategy for traders to analyse various time frames while determining the “trading circle” of the security. Through the Multiple Time Frame Analysis (MTFA) traders can regulate the trend both on smaller and bigger scales and recognize the overall market trend. The whole process of MTFA starts with the exact identification of the market direction on higher time frames (long, short or intermediary) and analysing it through lower time frames starting from a 5-minute chart.
Volume shows the number of securities that are traded over a particular time.
- Higher volume = higher degree of intensity or pressure.
In order to determine the upward or downward movement of the volume, traders should look at the trading volume bars usually presented at the bottom of the chart. Any price movement is more significant if accompanied by a relatively high volume + a weak volume. Take note: Not all volume types may influence the trade, it’s the volume of large amounts of money that is traded within the same day and greatly affects the market.
What is Range trading?
- A Range trading strategy (Channel trading) is normally associated with the lack of market direction and it is used during the absence of a trend.
Range trading identifies currency price movement in channels to find the range. This process is carried out by connecting a series of highs and lows with a horizontal trendline.
In order to fully understand the core of the support and resistance trading strategy, traders should understand what a horizontal level is. A horizontal level is:
- A price level indicating either a support or resistance in the market. In technical terms – price lows and highs respectively.
The term support indicates:
- The area on the chart where the buying interest is pointedly strong and exceeds the selling pressure.
The Resistance level indicates:
- An area on the chart where selling interest overpowers buying pressure. It is usually marked by previous peaks.
In order to develop a support and resistance strategy traders should be well aware of how the trend is identified through these horizontal levels.
Trends represents one of the most essential concepts in technical analysis. All the technical analysis tools that are used have a single purpose and that is to help identify the market trends. What is a Forex Trend? Much like any other trend for example in fashion- it is the direction in which the market moves. More precisely and good to know, the foreign exchange market does not move in a straight line, but more in successive waves with clear peaks or highs and lows. Depending on the movement of these ‘highs and lows’ one can then understand the trend’s type. There are three types of trends that the market can move in:
Traders and investors confront three types of decisions:
- To buy
- To sell
- Do nothing
During any type of trend, traders should develop a specific strategy. The buying strategy is preferable when the market goes up and equally the selling strategy would possibly be profitable when the market goes down. But when the market moves sideways the third option – to stay aside – will be the cleverest decision.
What is Forex technical analysis? Forex technical analysis is the study of market action by the primary use of charts for the purpose of forecasting future price trends. Forex traders can develop strategies based on various technical analysis tools including –
- Market trends
- Resistance levels
- Chart patterns
Forex traders can conduct a Multiple Time Frame Analysis by the use of different timeframe charts. Technical analysis strategies are a crucial method of evaluating assets based on the analysis and statistics of past market action, past prices and past volume.