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The most crucial fibonacci retracement levels are 38.2% and 62.8%; others are 75%, 50% and 33%. Fibonacci retracement is just one of the techniques used by successful Forex traders but it is not the only technical analysis strategy that can help you make substantial amount of earnings in trading in currencies.

Support and resistance levels on bar charts are one of the major components in the study of technical analysis in Forex trading. Many traders make use of support and resistance levels to examine entry and exit points when trading markets. When establishing support and resistance levels on charts, a trader should not overlook Fibonacci percentage ‘retracement’ levels. What is a retracement? A retracement is a pullback of the currency price before the price resumes the original direction of movement. What is Fibonacci retracement? Fibonacci retracement is one of the many aspects of Forex market technical analysis. Fibonacci in the Forex market is a type of line study used to predict as well as calculate price pullback levels. It is placed directly on the price chart within the trading platform and this technical indicator will automatically calculate the pullback levels on the currency price chart. Fibonacci Retracement is used to determine support and resistance levels in the market. Fibonacci Retracement is essentially based on the assumption that the market will follow a predictable pattern and at particular points it will retrace its steps before moving on with its original direction. This technical analysis utilizes ratios from numbers in a series; you can take 2 numbers in the series and divide them to form a ratio. The 2 Fibonacci technical % retracement levels that are most crucial in Forex market analysis are 38.2% and 62.8%. Most Forex market technicians will track a retracement of a price uptrend from the beginning to its most recent peak. Other important retracement %s are 75%, 50% and 33%. For instance, if a price trend starts at 0, peaks at 100, and thereafter declines to 50, then it would be a 50% retracement. The ratio of 0.0% is considered the start when the Forex market retraces itself while the ratio of 100% marks when the market entirely reverses its direction. These 2 points are referred to as the trough and the peak respectively. Once you identify these 2 points in the trading patterns, then it is time to start identifying possible support and resistance levels. Why Use Fibonacci Retracement The main purpose of using technical analysis in the Forex market is to identify trends and patterns that can be utilized to evaluate the optimal time to buy or sell currency on the market. There are many different strategies that traders employ for technical analysis and Fibonacci Retracements is one of the many strategies that can be used. Fibonacci Retracement is based on the belief that the Forex market will move in one particular direction and at specific points it will retrace its steps before moving forward in its original direction. This strategy attempts to identify these points on time so that you can make a successful trade. The price of a Forex currency pair does not necessarily move up or down in a straight line. Usually it moves up or down in a zigzag pattern. Fibonacci Retracement Levels comes in handy as the tool that is used to calculate where the zigzag will stop. The Fibonacci levels are 38.2%, 50% and 62.8%, these points form the points at which price is likely to make a pullback. Fibonacci Retracements are an effective technical analysis strategy that Forex traders can use to profit from strong trends when trading in the Forex market. The ratios created helps traders to determine when you should enter the market based on a set of numbers that naturally occur in nature. During the trend, the market will retrace by a certain % point and that pullback is essentially at one of the Fibonacci ratios. However, to fully profit from techniques such as Fibonacci retracements you need to understand other aspects of technical analysis as well. The trend is your friend" - always identify the prevailing trend, and never trade against it, but rather wait for retracements and then enter trades in the direction of the trend.

Introduction to Candlesticks Charting In the Forex market, there are two ways of analyzing the price of the currencies; fundamental analysis and technical analysis. Fundamental analysis utilizes fundamental attributes associated with economic statistics while technical analysis deals more with psychological component of traders which sometimes is influenced by emotions. Candlestick charts are one of the most effective means of gauging the sentiments of other traders in the market. What is candlestick charting? Candlestick charts are commonly used as a display method for showing currency prices on a Forex chart. The chart contains price bars that conveys low, high, open and close price for a particular Forex currency pair over the time frame that one candlestick represents; it can be 1hr, daily, weekly and the list goes on. Even though bar charts and candlestick charts present the same data, they differ. Candlestick chart is a visual display of plethora candlesticks that make up the price movement across a given time frame for the specific currency pair being analyzed. The unique visual contrast helps traders to spot repetitive price action setups in an easier and enjoyable way as compared to using line charts or standard bar charts. Forex candlestick charts use red and blue colors in the display. There is usually a dramatic color variation between bullish and bearish bars. This makes spotting using candlestick charts easier than using standard bar charts of the same color. When you look at candlestick charts and bar charts side by side, you will realize that bar charts are plain and thus, do not hold your interest and attention as long as dynamic and colorful Forex candlesticks charts do. Line charts are not so good tools for price action investors. This is because they only show one piece of data; open, close, low or high instead of four pieces of data shown by candlestick charts. It is worth mentioning that line charts are just good for trend identification. Ways of Using Forex Candlestick Charts There is a myriad of different candlestick patterns that traders need to know about. But for effective and efficient trading, a trader should just use few core candlestick patterns that will do an exemplary job of providing the trader with profitable trading strategies in the Forex market. Trading using candlestick patterns can be simple and effective way to evaluate and analyze the Forex market. However, there can be complexity if the trader uses over-lay numerous lagging indicators on their charts. The use of numerous lagging indicators diminishes the power of the candlesticks. If you have to use indicators, it is advisable that you make use of several indicators. A couple of moving averages can do to help in identifying dynamic support and resistance areas. This will help you to analyze and trade a Forex price chart with a high degree of accuracy. Candlestick charts make price action signals easier to spot and this makes the trading in currencies more fun. The main types of candlestick patterns in the Forex market are: Reversal Candlestick Patterns These are charts that are used to confirm the reversal of the former Forex market trend. Reversal candlestick patterns are usually formed after extended market trend downwards or upwards and the market is ready to reverse. For instance, head and shoulders and reverse head and shoulders patterns, double tops and double bottoms patterns and the list goes on. Continuation Candlestick Patterns These patterns show continuation trend in the direction of prior market trend. Continuation candlestick chart patterns are usually formed when the Forex market is taking a break before continuing with its movement in the same direction. Examples bear flag/pennant, ascending and descending triangle patterns, bull flag/pennant and so forth. Bilateral Candlestick Chart Patterns These types of charts form when the market is taking a break before changing to a different direction. Therefore, Forex traders should make use of Forex candlestick patterns in their trading in the Forex market to enhance their profits.

When you trade a leading indicator, you by definition have probabilistic control over your risk, because you will always have a clearly defined stop level that is not merely guessed at, but probabilistically derived as a key component of the indicator itself (built-in risk control).

The “Average Directional Movement Index”, or “ADX”, indicator is a member of the “Trend” family of technical indicators. Traders use the index to determine if a trend will extend or gradually lose its strength, valuable information when setting entry and exit levels in the forex market.

Technical indicators in essence are simply used to predict the future behavior of the market for traders to make a wise decision in their trading.

Leading Indicators are in essence the Oscillators. An oscillator is any object or data that moves back and forth between two points.

A leading technical indicator is an indicator that changes before the market as a whole and therefore used to predict changes in market direction(A leading indicator gives a buy signal before the new trend or reversal ...) Examples of leading indicators are Stochastic Indicator and Relative Strength Index (RSI). These indicators attempt to identify points where the market is either overbought and likely to reverse down or oversold and likely to reverse and curve back up.

In the Forex market there are the technicians and fundamentalists. Fundamentalists are the traders that utilize fundamental analysis in their trading. They argue that for a trader to make substantial profits from the Forex market, he has to research a company exhaustively from stem to stern while keenly dissecting annual financial statements, comparing price earnings and other ratios, studying markets and competition to know if the company is a buy or sell. For fundamentalists, determining the worth of a company in the future by looking at the company’s stock chart is like trying to ride a motorcycle facing backwards. According to fundamentalists, the price does not give you any idea where the market is going but just where it has been. On the flip side, technicians argue that analyzing a company from stem to stern is a waste of time; by the time a trader is completing to access the data the market will have already changed. Technicians only have to analyze the charts to know whether it is a buy or a sell. Using technical analysis help traders to make big bucks however you have to know how to use technical analysis appropriately to soar high in currencies trading. In this article, we are going to look into details on how you can chart your way to good tidings in the Forex market using technical analysis. Trade Valid Data Technical analysis is designed to get odds in favor of traders and for a trader to trade successfully he needs meaningful data. Therefore, instead of day trading, look for trades that last a week or long term trend follow. Day traders never win big bucks because all short term volatility is random. Do not just use daily charts but utilize the weekly charts too to spot major trends. Understanding Support and Resistance All Forex traders who have made it big in the trading of currencies have a good grip of support and resistance. Trade in valid levels of support and resistance starting with weekly chart to see whether they line up with the daily levels to make a well calculated buy or sell decision. Have a Good Grip of Breakout Methodology While support and resistance can hold, they can break as well. A majority of major trends in the currency market usually take place when there is new market highs and not market lows. Many traders do not like buying new highs as they feel that they have missed a bit of the move. Though this holds water, these trends simply accelerate away and you should be prepared to grit your teeth and enter the trade. Use Momentum Appropriately Will support or resistance hold or break? You cannot tell with certainty and as such you should use momentum to your advantage. Whenever you enter a trade in the Forex market, your view should be supported by price momentum always. The best indicators to use for this purpose are Relative Strength Index (RSI) and Stochastic. These technical indicators will help you to time your trade better to get the odds on your side and make big bucks. If you are using Forex technical analysis to trade, never trade without incorporating momentum. Keep It Simple The trading system should be simple. Simple systems work best since they have fewer elements to break and also are more robust in real time trading. Be Disciplined and Patient Discipline and patience are paramount to trade successfully in the Forex market. You need to exercise patience and not just trading for the sake of it. Do not lose discipline and hurry for profits, when you enter a trade maintain discipline and ensure that you place a stop where necessary. Always have a realistic target. All the best in your trading!!

As discussed in part I, many Forex traders use technical indicators to help them identify probability of trade entry as well as exit points. We discussed different types of indicators and how to trade effectively using multiple indicators. In this article, we are going to look at other aspects of trading effectively using technical indicators. Keep the Trading Charts Clean Trading charts should be used to enhance your trading in the Forex market and not hinder it. To achieve this, you should keep the trading chart clean to ease market analysis. The charts should be easy to read so that you can rapidly decipher and respond to Forex market activity. Customize the charts so that they can serve your interests in an effective and an efficient way. All in all, have clean charts and workspaces that will enable you to trade effectively in the currency market using technical indicators. Avoid Information Overload Information overload happens when as a trader you attempt to interpret a lot of data at once. When you have too much information you are analyzing at the same then you will be unable to respond accordingly. It is recommended that you should avoid information by eliminating extraneous indicators from your workspace. This will help to cut down on cluttering. Also, you should try as much as possible not to use same types of indicators on the same chart; just use complementary indicators for effective results in your trading. It is worth noting that as a trader you should change indicators you use from time to time as market conditions changes. The strategies that you employ in trading in the currency market as well as trading style also determine the technical indicators to use. Input Variables Different indicators allow customization by changing input values. Variables like look back period as well as the type of price data used in calculations can be altered to give an indicator various values and help to point different market conditions. Enter a range for a specified input like moving average length and the trading platform will work the calculations to get the input that creates favorable results. Multivariable optimizations help traders to analyze 2 or more inputs simultaneously to determine what combination of variables that will lead to good results. Optimization is thus important in helping traders in identifying the most profitable variables. It is good to note that optimization is great but over-optimizing can make theoretical results look amazing but in real sense live trading is suffering. Understand and utilize appropriate forward testing and back testing techniques as part of an overall strategy development process. As a trader in the Forex market, you should know that technical analysis deals in probabilities and not certainties. There is no combination of technical indicators that can accurately predict the currency market moves a 100 %. While usage of many indicators at once or incorrect usage of technical indicators can blur a trader’s view of the currency market, Forex traders who utilize technical indicators effectively and carefully in their trading increases their odds of making substantial amount of money in the Forex market. In conclusion, simple moving average indicators are very good in the Forex market especially when used with trend lines. They help you to spot and stay with the trends in the market as well as pick areas of value to buy into. For good results, you should use moving averages for long term trends only since they are not beneficial in swing trading or Forex scalping. It is worth noting that these indicators should be used with other complimentary technical indicators for optimal benefits. Take time and utilize the trading tools on your platform to make the best out of trading in currencies.

Technical indicators help traders in the Forex market to judge a trend’s strength and sustainability while price charts help Forex traders to identify tradable market trends. In the event an indicator suggests a reversal ensure as a trader you confirm the shift before acting. This can be achieved by using another indicator or by waiting for another trading period so that you can confirm the same indicator’s signal. Many Forex traders use technical indicators to help them identify high probability trade exit and entry points. There is a myriad of technical indicators available in the Forex market today and therefore it is easy for traders to use many indicators inefficiently. In this article, we are going to expound on how to use various indicators, how to optimize indicators and how to avoid information overload so that you can be in a better position to most effectively take advantage of Forex Market. Some of the most commonly used indicators are: Moving Averages These are some of the most widely indicators in Forex trading. Moving averages indicators helps traders to ascertain existing trends, view overextended trends about to reverse as well as identify emerging trends. There is simple moving average, exponential moving average and weighted moving average. Simple moving average weighs each and every price point over a given period of time equally. Price points are usually added together and averaged. On the other hand, a weighted moving average provides more emphasis to the latest data. These types of moving averages smoothens out a price curve while at the same time making the average more responsive to recent currency price changes. Exponential moving average are used to weigh more recent price data but in a different way from weighted moving average. It multiplies a % of the most recent price by the previous period’s average price. Relative Strength Index (RSI) RSI indicators are used to measure momentum of price movements on a scale of 0 to 100. It is worth noting that you should always confirm Relative Strength Index signals using other indicators. Divergences between RSI and prices may suggest a trend reversal. Stochastics Stochastic or oscillators help to monitor a trend’s sustainability as well as signal reversals in currency prices. There are two types; %D and %K measured on a scale ranging from 0 to 100. %D is slow and takes more time to turn while %K is fast and more sensitive. Bollinger Bands These are volatility curves used to identify lows in price or extreme highs. They establish bands around a currency’s moving average using a defined number of standard deviations around the moving average. It is worth mentioning that touching a low or high band does not mean an immediate trend reversal. These indicators adjust dynamically as volatility changes; this implies that touching the band simply means prices are extremely volatile. It is thus advisable that you use Bollinger Bands with other technical indicators to determine the trend’s strength. Effective Use of Multiple Indicators Technical analysts use technical indicators information to evaluate historical performance as well as predict future prices. The trader must interpret signals from technical indicators to determine trade entry or exit point that conforms to his own unique trading style. For optimal and effective use of technical indicators in the Forex market avoid multicollinearity at all costs. Multicollinearity refers to the multiple counting of same information. This happens when same types of indicators are used in one chart. Use of same types of indicators in one chart creates redundant signals that can be misleading. Instead of using the same types of technical indicators in one chart use complementary indicators. For instance, you can use Stochastic (momentum indicator) and ADX (Average Directional Index) which is a trend indicator in one chart. These two types of indicators provide different information about the market conditions and therefore used to confirm the other.

"Just like in any business venture, trading in the Forex Market involves risks but as a trader you have to utilize the available technical tools effectively and put formidable strategies in place in order to rip huge benefits from the currency market.

A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time. It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity and currency price patterns. They appear superficially similar to box plots, but are unrelated.

Trading in the Forex market in the direction of a strong trend lowers risk and increases profit potential. The ADX (Average Directional Index) is used in the market to establish when currency price is trending strongly. Average Directional Index is in essence the ultimate trend indicator. In this article, we will take time to examine the value of Average Directional Index as a trend strength indicator. ADX calculations are usually based on the moving average of price range expansion within a stipulated time frame. ADX is plotted as a single line with various values ranging from 0 to 100 in the same window as two DMI (Directional Movement Indicator). Average Directional Index is non-directional and as such it registers trend strength by rising uptrends and downtrends. Quantifying Trend Strength Average Directional Index values enable traders to identify most profitable and strongest trends to trade in the currency market. ADX values are also critical for differentiating trending and non-trending conditions. A majority of Forex traders will use ADX value above 25 to indicate that the trend’s strength is good enough to allow for trend trading strategies. On the hindsight, when ADX values are below 25, many traders will avoid trend trading strategies. Low Average directional Index is usually a sign of distribution or accumulation. When ADX values are below 25, price enters range conditions as well as price patterns becomes easier to identify. Price then moves up and down between support and resistance to find buying and selling interest respectively. Thus, from low ADX conditions the price will eventually break out into a trend. The direction of the ADX line is critical fro reading trend strength. When the ADX line is rising then the trend strength is increasing as well as price of the currencies moves in the direction of the trend. On the flip side, when the ADX line is falling then the trend strength is decreasing and the currency price enters a period of consolidation or retracement. It is worth noting that there is always a common misperception that a falling ADX lines implies the trend is reversing. The truth of the matter is that a falling ADX line only shows that the trend strength is weakening but does not imply that the trend is reversing unless in special cases when there has been a price climax. Trend Momentum The series of ADX peaks is a visual representation of overall trend momentum. Average Directional Index clearly shows when the trend is losing or gaining momentum in the market. Momentum in its basic sense is the velocity of price. A series of higher ADX peaks shows that the trend momentum is increasing. On the other hand, a series of lower ADX peaks show that the trend momentum is decreasing. Knowing when the trend momentum is skyrocketing gives the trader confidence to let profits run. A series of lower ADX peaks is a warning to the traders to watch price and manage risk. The best trading decisions in the Forex market are made on objective signals and not from emotions. When currency price makes a higher high and Average Directional Index makes a lower high then there is negative divergence. It is worth mentioning that divergence is not a signal for a reversal but a warning that the trend momentum is changing. Any time the trend changes character in the market then it is time to assess and manage risk. Strategic Use of Average Directional Index Currency price is the most important signal on a chart. Therefore it is advisable that you read price first then read ADX in the context of price. When indicators are used, they should add something that price alone cannot tell. Breakouts from a price range usually occur when there is a disagreement between buyers and sellers on price. ADX tells traders when breakouts are valid by showing when Average Directional Index is strong enough for price to trend in the market after the breakout. Best profits come from avoiding range conditions and trading the strongest trends. ADX helps traders to identify trend conditions and also enable them to find the strongest trends to trade in. “The trend may be your friend, but it sure helps to know who your friends are.”

Thanks for the good feedback, I appreciate!!

Diverse price movements that occur in the Forex Market in the past help the traders to analyze future trends. In the contemporary world, there is an array of technical analysis tools that traders use to evaluate Forex market future trading situation. A trader can sue indicators, charts as well as market trends. Many and many traders are losing money in the currency market because of lack of proper knowledge on Forex technical analysis. A thorough and comprehensive understanding of technical analysis which help traders to predict future price movements of different currencies they are trading in, can make a difference between making huge profits from the Forex market and losing substantial amount of money in your trading. Technical analysis uses charts and indicators to predict changes in foreign currencies. It in essence forecasts the direction of the Forex market and provides precise and material information about currencies. Forex technical charts usually show the existing state in the market while technical indicators are used to allocate diverse goals to establish trends in the market. Nowadays, a majority of Forex traders are utilizing technical analysis as prime trading tool in the currency market because it has been lauded as effective. It is a science, a strategy as well as skill of predicting price movements based on statistics and mathematical computations. Reasons Why You Should Use Technical Analysis in Your Trading Technical analysis is more accurate than fundamental analysis because it technical analysis is backed up by facts which entail past price data. Technicians (technical analysts) use technical analysis to provide information on the patterns of trading while at the same time making price forecasts and movements. Technical analysis is simple to follow. It provides facts and statistics; this makes data provided consistent and cannot be construed in any way. Consistency provides traders with a fair playing field to buy and sell currencies. Technical analysis is easier to perfect than fundamental analysis. To master the art of fundamental analysis, you will require several years of practice while technical analysis can be mastered within a couple of months making it more efficient. Especially with development in technology, a trader can easily perform technical analysis. You simply use the computer to develop patterns and trends within minutes. Technical analysis has various approaches which include use of charts, technical indicators, and the list goes on. Trading charts gives patterns that are used to show trends of price movement of foreign currencies. To use trading charts optimally, you need to master this strategy; this cannot be achieved overnight but in the long run. You can also use direction of chart movements using assessment of the price action in the market. Support and resistance and moving averages indicators are used to achieve this. Bollinger Bands and moving averages helps to monitor the trend of currency prices. When the market is volatile, the bands extend but when the market is calm then the bands narrows. It is worth mentioning that in the event that Bollinger Bands tighten sharply, it is an indication that instability will drastically increase and a brand new price may start. Technical analysis also uses Relative Strength Index which has values of 0 to 100. RSI is used by technicians to show trend reversals. If a value in the market goes beyond 20 it is an indication that a new uptrend shall start while the value goes beyond 80 it shows that a downtrend may commence. In conclusion, to make substantial amount of money from Forex Market you have to access hard facts and make use of accurate analysis. Technical analysis comes in handy because it utilizes scientific measurements and calculations.

Risk-taking: Never test the depth of the river with both feet.

WC, thanks for the feedback. I am interested to know more about technical indicators.

As discussed earlier in Part I, price action analysis refers to a study of the movement of price in a given market over certain duration of time. This analysis can help identify a trending and consolidating market. A trending market is one where the price action tends to generate a directional bias either upwards or downwards resulting into uptrend and downtrend respectively. There are cases and times when the market does not show any directional price action. This period is referred to as a consolidating market. The easier way of checking whether a market is consolidating is by looking at the absence of higher highs, higher lows, lower highs and lower lows. The sideways movements in price action and the bouncing between horizontal support and resistance levels is a characteristic of consolidating price pattern. Trading Forex with price action strategies Using price action strategies to trade in the Forex Market requires an understanding of the whole market from the price movement perspective. Market participants and the way they respond to economic variables globally tend to be repetitive in nature and predictive. This results into a price action in the market that is reminiscent of previous price actions. The price patterns created by these repetitive market participants’ market behaviors can be generally referred to as price action trading strategies. There are a number of price action trading strategies which are executed in different ways. The price action patterns can either reflect a changing market sentiment or a continuation of the same. In simple terms, price action patterns can help you predict where the market will move next. Before you inculcate the usage of any indicators which may be a bit confusing from the onset, it is generally advised that you use the price action data raw as reflected by the candlestick charts. Candlesticks are preferred due to the dynamic and forceful way in which they reflect the price data for a given market or sets of markets. The removal of the indicators helps create space for the price action charts therefore making it more elaborate and clear for interpretation. Also, the concentration shifts from the indicators to only the price chart. Drawing in the key chart levels and analyzing price action patterns to trade from should be the next step. Trading from Confluent Points Drawing in key chart levels also helps in identifying confluent levels. In trading, these levels are very critical. The confluence point in a price chart refers to a point in the market where levels intersect each other. Confluence points can occur in an uptrend or downtrend, exponential moving averages, horizontal and support levels and in event areas. In the analysis of price action, one of the primary goals is to identify an obvious price trading strategy in a confluent point. For you to internalize what constitutes an obvious price action pattern, you have to dedicate time to study and spend meaningful time on the screen. The moment you spot a high probability price action signal, it is advisable that you base the analysis within that particular market context where the signal has occurred. Before you decide whether to risk your money on the signal or not, it is imperative to check for the factors of confluence. These include the horizontal and resistance levels, uptrend and downtrend, exponential moving averages, event areas and 50 % retrace levels. As a conclusion, it is clear that economic variables are many and cannot be analyzed in isolation. The good news is that these economic variables leave footprints on market price charts. Whether a human trader or a computer enabled trading system is used, a price movement pattern must be created. This pattern embodies the emotions and behavioral patterns of all the market participants. Learning how to trade price action therefore makes you enjoy the collection of all the market variables and traders perceptions in one basket.

In trading, decisions can be made from a stripped down chart. This is a discipline developed over time where the trader decides not to use lagging indicators outside a given range of moving averages to help him identify support and resistance levels in the market. The movement of price over a given duration of time is captured as a set of data and is displayed on price charts. Every financial market has loads of these data captured over varying periods of time. The data represents the actions and beliefs that the traders in that particular market have while trading for that specified time period. Price action therefore is a portrayal of the action and beliefs of Forex traders. Price movement is influenced by a number of things amongst them economic data and various global news items. In the currency trading market, economic data resulting from the performance of various sectors of economies tend to have a driving role as far as the trading of the affected currencies is concerned. Bad economic projections would mean that appetite for a given currency goes down relative to others. That said, we do not as traders need to individually analyze these economic and global news so that we can trade successfully. The rationale behind this is that the price movement in itself captures all the sentiments on a market’s price chart. The use of lagging indicators in the face of price action charts is of no use. The reason is, the price as reflected on the charts already embodies all the variables as seen by the traders in their actions and beliefs. The movement of price is so powerful such that in the event you want to develop a trading strategy that is based on high probability and profitability, price action will be sufficient to help you achieve that. The signals you use to develop the trading strategies can be collectively referred to as price action trading strategies. They not only help you to analyze and understand the price movement in the market but they also help you to project the likely future price movement with a high degree of certainty. Price action charts are the primary sources of any indicators. This means that for you to formulate any indicator, the data for such modeling comes from the price action; raw as it is. The implication of this is that you do not need to overburden your price charts with so many indicators for it to make sense. Putting so many indicators on your price charts has severe impacts and can even affect the quality of analysis. The space allocated for the price chart will be squeezed to create room for the indicators meaning that the price action will not be as clear as it would have been were it few or no indicators were included on the price chart. The inclusion of indicators also tends to shift the focus from the real price action to the indicators which are secondary sources of information. This creates confusion and makes the analysis vague. Price action has been so instrumental to help identify trending and consolidating markets. The ability of a trader to identify these kinds of market is very crucial if his strategies are to work. For the trending market, there can be an uptrend or a downtrend. An uptrend is easily recognized by higher highs and higher lows while a downtrend on the contrary is identifiable by lower highs and lower lows. In view of all this, price action remains to be an instrumental tool for any trader who want to make strategies that are going to yield substantial returns and benefits from trading in the Forex Market.

Technical analysis is a core discipline in Forex trading. It is a security analysis discipline used for forecasting the direction of currencies through the study of past Forex market data. Technical analysis is the use of past price behavior to guide trading decisions in asset markets. Investors and economists are interested in technical analysis for different reasons. Investors are concerned with “beating the market,” earning the best return on their money. Economists study technical analysis in foreign exchange markets because its success casts doubt on the efficient markets hypothesis, which holds that publicly available information, like past prices, should not help traders earn unusually high returns. Instead, the success of technical analysis suggests that exchange rates are not always determined by economic fundamentals like prices and interest rates, but rather are driven away from their fundamental values for long periods by traders’ irrational expectations of future exchange rate changes. Technical traders will not hold positions for months or years, waiting for exchange rates to return to where fundamentals are pushing them. In contrast, fundamental investors study the economic determinants of exchange rates as a basis for positions that typically last much longer, for months or years. Some Forex traders, however, make use of technical analysis in conjunction with fundamental analysis. This doubles their positions when technical and fundamental indicators agree on the direction of exchange rate movements. A technical analyst's behavior is guided by three important principles:  Market action (prices and transaction volume) discounts everything. In other words, all relevant information about the asset is incorporated into price history, so there is no need to forecast the fundamental determinants of an asset’s value. As a matter of fact, Murphy (1986) claimed that asset price changes often precede observed changes in fundamentals.  Asset prices move in trends. Predictable trends are essential to the success of technical analysis because they enable traders to profit by buying (selling) assets when the price is rising (falling). The analysts appeal to the Newton's law of motion to explain the existence of trends: Trends in motion tend to remain in motion unless acted upon by another force.  History repeats itself. Asset traders will tend to react the same way when confronted by the same conditions. Technical analysts do not claim their methods are magical; rather, they take advantage of market psychology. Technical analysts used two methods in analysis: charting and mechanical rules. Charting involves graphing the history of prices against a specific period, determined by the technical analyst, to predict future patterns in the data from existence of past patterns. This subjective system requires the analyst to use his judgment and skills in finding and interpreting the patterns. To identify trends through the use of charts, practitioners must first find peaks and troughs in the price series. A peak is the highest value of the exchange rate within a specified period of time (a local maximum), while a trough is the lowest value the price has taken on within the same period (a local minimum). A series of peaks and troughs establishes downtrends as well as uptrends respectively. Mechanical rules, on the other hand, imposes consistency and discipline on the analyst by requiring him or her to use rules based on mathematical functions of present and past exchange rates. Charting is very dependent on the interpretation of the technician who is drawing the charts and interpreting the patterns. Mechanical rule avoids this subjectivity and so is more consistent and disciplined, but, according to some analysts, it sacrifices some information that a skilled chartists might discern from the data. Mechanical trading rules are even more explicitly extrapolation than charting; they look for trends and follow those trends. A well- known type of mechanical trading rule is the "filter rule,” or “trading range break” rule.

Technical analysis in Forex market involves the use of technical indicators and charts to predict price movements of a currency. Forex traders who use technical analysis in their trading have lauded it as very effective tool in currency trading. On the flip side, traders who use fundamental analysis believe technical analysis is a no go zone. Just like there are two sides of the coin, technical analysis has its benefits as well as its limitations. In this article, we are going to expound on the benefits of technical analysis in the Forex market. Price Movement Technical analysis usually focuses on the movement of prices of a currency in the market. Charts are used to show how prices are moving; when the prices are trending as well as strength of those trends. Oscillators, momentum and volume indicators give a clearer scenario of the market action. Using charts you can obtain price movements details at a glance. Unlike in fundamental analysis where the fundamentalists make use of economic reports, in technical analysis this does not apply. By analyzing the movement of prices of currencies in the market, a trader can easily make a well calculated buy or sell decision to maximize his margins. Easy to Find Trends Looking at a moving average for example, a trader can easily tell whether the price of the currency is trending or simply stuck in a range. Whether the currency is moving up, down or sideways, a chart will easily exhibit the trend. Trends are very important to technicians (technical analysts) because a currency has a tendency of moving in the direction of a particular trend. Using charts, it is easy to establish these trends and make an informed and wise decision in your trading. Less Time Consuming You do not have to perform complex mathematical operations when you are using technical analysis in trading of currencies. Internet has a rich wealth of various technical indicators that can be used by a trader to make huge profits from the market as well as reliable trades. Technical analysis is thus less time consuming as compared to fundamental analysis. It is also less tedious and cost effective. Loads of Informative Data Technical indicators and charts provide an array of information within few moments. First and foremost, using technical analysis trends can easily be found; volatility, momentum and trading patterns easily and quickly found. There is a host of indicators in Forex market and each provides information on various aspects of currency movement. This information is of paramount importance to traders to make substantial and profitable trades. Easy to Identify Patterns in the Market Actions in the market tend to unmistakably and clearly repeat themselves. Using charts enables a trader whether newbie or advanced to find patterns that will help him predict price movements. Like star constellations, patterns in the currency trading can be complicated and complex but with time it becomes easier when you master the art. Some of the patterns that are commonly used in Forex market are rounding tops and bottoms, head and shoulders, double and triple tops and ascending and descending triangles. These are proven patterns that currency prices usually follows. They have very strong predictive powers in the market. Charts essentially tell a story about the price movement of a currency. The story can be complex with various plots and twists. On the other hand, the story can be simple with only few characters and a single narrative. Technical indicators and charts can give just basic information on support and resistance or trend. They can also give deeper information on how momentum is building, strength of a trend and whether the market is developing in a favorable way for trading. Technical analysis can make a difference between substantial and profitable trades and loss making ventures. Use them effectively and you will enjoy good tidings all year round.

Trading in the direction of a strong trend reduces risk and increases profit potential. The average directional index (ADX) is used to determine when price is trending strongly. In many cases, it is the ultimate trend indicator. After all, the trend may be your friend, but it sure helps to know who your friends are.

What are Forex Technical Indicators? Why are they Important? These are some of the questions that Forex traders ask themselves. Well, in this article we are going to expound on different types of Forex technical indicators and their importance in the currency market. Forex market has become one of the most popular money making hub across the globe. Traders from all facets of lives are putting their best feet forward to tap into this fast growing money making business. This is essentially because of the fact that opportunities available to make profits in Forex market are much greater than opportunities found in any other investment. This does not mean that when you are trading in currencies there is no risk that is involved. Just like in any business venture, there is risk that is involved but it is upon you as a trader to use the available trading tools effectively to mitigate the risks. One of the tools that you have to learn and understand how they work in order to make huge profits in Forex market is the technical indicators. When you master the art of using multiple technical indicators to track trends in the market then you will witness great returns on your initial investments. You will also lower your chances of making losses as you trade in currencies. Technical indicators are basically mathematical formulas that help traders to recognize and take advantage of various trends in the Forex Market. These tools predict market movements that if analyzed properly will enable a trader make good tidings. The currency exchange market is a volatile market and as such it has several ups and downs. Learning various indicators will thus be very instrumental in your trading. Using different indicators will give you a better idea of the trends in the currency market so that you can make a well calculated and wise decision in your buy or sell options. The various types of Forex technical indicators are: Strength Indicators Strength indicators are indicators that describe the intensity of the currency exchange market opinion on a certain price by evaluating the market positions taken by different participants in the market. Volume and open interest are the essential ingredients of strength technical indicators. Trend Indicators These type of technical indicators smooth price data out so that a consistent down, up or sideways trend can be seen easily. Some of the indicators that falls in this category are Moving Averages and Trend Lines. Volatility Indicators Volatility refers to the magnitude of the day to day price fluctuations in the market whatever the direction of trend is. This means that changes in the volatility in the market signifies changes in prices. Indicators in this group are Bollinger Bands. Momentum Indicators Momentum indicators determine the strengths or weaknesses of trends as they progress over time. Momentum is lowest when the trend changes while highest when trend starts. When momentum and price diverge, it signals weakness. If price extremes happen with weak momentum then it suggests an end of the movement in that particular direction. On the other hand, if momentum is trending strongly and prices are flat then it shows a potential change in price direction. Indicators such as Moving Average Convergence and Divergence (MACD), Relative Strength Index (RSI) and Stochastic are all momentum indicators. Cycle Indicators These types of technical indicators usually indicate repeating market patterns from different recurrent events such as elections, seasons and the list goes on. Cycle indicators determine the timing of a specific market pattern. An example of Cycle indicator is Elliott Wave. Support/Resistance Indicators Support and resistance indicators usually shows different price levels where there is a repeated rise or fall of prices of currencies in the market and then reverse. This is due to supply and demand of currencies in the Forex Market. Example is Trend Lines indicators. If you use these technical indicators appropriately in your trading whether you are a newbie or advanced trader, the yields will be very appealing. We wish you GOOD LUCK as you trade and may your star shine brighter every day in the Forex Market.

The Chaikin Money Flow (CMF) is an oscillator indicator that was developed by Marc Chaikin. He created this indicator to add to his earlier cumulative indicator. Chaikin Money Flow indicator is used to measure the degree to which money is flowing in or out of a currency over a given period of time. Instead of cumulative total of money flow volume, the Chaikin Money Flow basically sums up the Money Flow Volume for a stipulated period of time. Chaikin Money Flow usually oscillates around the zero line. Calculation Chaikin Money Flow = cumulative total of the Accumulation/Distribution values for 21 days / cumulative total of volume for 21 days Money Flow Multiplier = [(Close - Low) - (High - Close)] / (High - Low) Money Flow Volume = Money Flow Multiplier x Volume for the Period Each period Money Flow Volume relies on the Money Flow Multiplier. The multiplier is +ve when the close is in the upper half of the period's high-low range. On the flip side, it is negative when the close is in the lower half. The multiplier equals to 1 when the close equals the high and on the other hand, it equals -1 when the close equals the low. What this means is that the multiplier adjusts the amount of volume that ends up in Money Flow Volume. Chaikin Money Flow Function Chaikin Money Flow states that;  If a currency pair in Forex trading closes in the upper half of its trading range on a particular volume and day is strong then the pair is being accumulated  If the pair closes in the lower half of its range on strong volume then the trading pair is being distributed. Values of Chaikin Money Flow That are Used to Indicate Buy and Sell Pressure  Values that bounce between 0.1 and -0.1 and as well hang around the zero line are not strong enough to offer a bearish or bullish signal.  Values above 0.1 and below -0.1 are indicative of buying and selling pressure respectively.  Values above 0.25 and below -0.25 are indicative of strong buying and selling.  As the Chaikin Money Flow indicator turns up price keeps falling, this is a sign of divergence. When the indicator gets at the zero line it is a good opportunity to buy, in order to protect another winning position.  The indicator oscillates around the zero line which does not help a trader know which way the trend should go. But once you create a firm market bottom, an upward trend in both price and Chaikin Money Flow appears. Divergence between the Oscillator and Pricing Action  If a currency pair trends up while the Chaikin Money Flow rolls over and heads down then the currency pair will very likely top out soon after.  On the flip side, if a currency pair trends down while the Chaikin Money Flow bottoms out and begins to move up, then the pair will very likely follow. Conclusion Chaikin Money Flow is an oscillator that measures selling and buying pressures over a given period of time. Money flows though the bulls when Chaikin Money Flow is positive and bears when negative. Basically, selling pressure is stronger when the indicator is negative and buying pressure is stronger when the indicator is positive. As the rest of technical tools, Chaikin Money flow cannot used exclusively and has used in conjunction with other tools like Moving Averages Convergence and Divergence (MACD) or Relative Strength Index (RSI). A Forex trader it is important to include Chaikin Money Flow indicator in your technical analysis of the Forex market for effective and efficient trading. If you utilize this indicator appropriately you can make huge profits from this market.