Technical Analysis is the based on history and human behavior. What happened under similar circumstances is projected into the future and the forecast assumes that what has happened in the past will generate a similar pattern in the future. Anticipation that ‘history repeats itself’ is the basis used by the technical analyst.
Trend
The trend will continue to be in the same direction until there is good reason for that trend to change. If the trend is upward, the market will continue to move upward. If the trend is down, the forecast will be downward. There will be fluctuations within the trend and the task is to figure out which is a short term trend or a long term trend.
Moving Average
The 14 day and the 18 day moving average are for practical purposes almost the same... so you can use either one. If there is no clear indication of direction, the projection is that there will be no change of direction. Something fundamental will have to happen to create some volatility to create movement. However, if you keep a careful eye on the market, and use tight micro-management, you should still be able to find a discernible micro move in the market and make it pay for you.
Movement… If the price rises above the 'moving average' it gives us a buy signal. If the price moves below the moving average it gives us a sell signal.
Okay, we now have the ‘moving average line’ under our belts. We know what happens when the price moves across the Moving Average going up, but it can’t just keep going up forever. It must turn around at some point, right?
That’s where Bollinger comes in to play.
Bollinger Bands
Bollinger bands are used to tell us how far the price will go before it bounces back toward the moving average.
The moving average follows the price level and there is an upper band and a lower band both parallel to the moving average. Usually we can set the bands at a distance from the moving average that suits our personal trading pattern.
What normally happens is that the price moves away from the moving average it will retrace from the outside bands and if you see the price move toward an outer band, it likely it will bounce away.
However, if there is a breakout through one of the outer bands, the price will tend to continue in the same direction for a while and robustly so if there is an increase in volume.
Overbought-Oversold
After we have traded for a while, we begin to feel the market and we can almost see the people running to buy (or sell)’ The market develops a condition known as ‘overbought or oversold). There are indicators which tell us ‘how much’ it is overbought or oversold. On a scale of 1 to 100, eighty and above is overbought and twenty or less is oversold. Overbought, you get OUT. Oversold, you get IN.
Forex International Trading Robots
The best news is that you don’t have to learn all this stuff if you don’t want to. Super Traders with years of experience have developed software programs which will trade the market for you. These programs called ‘robots’ are not fool-proof, but many claim an 85 per cent accuracy. One is even at 95 per cent.
One of my acquaintances has this to say about them: “Don’t forget to trade the robots, they are smarter than we are”.
Come join us for reviews on several of these handy robots.
Happy Trading ….. Marybeth
Parabolic SAR (Stop And Reversal)The Parabolic SAR indicator is used to spot trend reversals. It is perhaps the easiest indicator to read, Dots are placed on the chart in positions either above or below the candles (the formula that calculates where the dots go is too complicated to get into).
Dots above the candles are a signal to sell.
Dots below the candles are a signal to buy.
Parabolic SAR works best when there are clear upward or downward trends. It does not work well when price movement is small.
Stochastics
Stochastics is an indicator that is used to measure overbought and oversold conditions in the market. It consists of a scale from 0-100. As the stochastics lines are above 80 it means that the market is overbought and a downward trend could be forming. When the lines fall below 20 it means the market is oversold and an upward trend may be
forming.
Stochastics are useful in determining when to lock in profits and when to issue buy or sell orders. But you should never rely on only one indicator. Combine several and adjust them to your trading strategy.
Did you find this information on Forex International Trading Systems useful? You can learn more about how this information can help you on Currency Trading Strategies with reviews on the Robot software programs on my website. Click here: forexcurrencyforex.Com
Click the XML Icon Above to Receive Currency Trading Articles Via RSS!
