Tuesday, March 3, 2009

Technical Analysis for Forex Trading

Financial market involves lots of data graphic. One of them is financial chart. It is used to show the trend of the market. Market trend describe the particular activity which happened in the market on the particular period. The ability to read this chart will boost your financial profit and improve your business sense. Sense is very important in this high risk financial market. Market trend also describe the market preferences to buy groups of products. From this chart you will know exactly what to do to increase your profit. This chart is your tools to make the right decision.

To understand Forex trading chart, you need to master the tools. Without having proper knowledge about this particular tools you will fail to fully use the chart as your technical analysis tools. Therefore, you should really understand the technical analysis tools.
1) Gann numbers. It name after an Investor which gain success in the old time. He links the relationship between, time, price and movements.
2) Relative Strength Index (RSI). The RSI is used to measure the up a down-moves ratio and put the calculation into a normal line and cause the index stick on the range of 1-100. There are some assumptions for this tool. The first assumption is overbought. It is the condition when the RSI numbers touch the 70 or greater. The opposite is the oversold condition where the RSI numbers touch 30 or lower.
3) Stochastic Oscillator. This tool is used to tell the condition or overbought or oversold. It is describe the amount in the scale of 0-100%. Stochastic Oscillator has two lines, the %K and the %D which will tell you the overbought or oversold.
4) Number Theory. It is based on the theory of Fibonacci number which has a sequence which builds by adding the first two numbers so it will form the third number.
5) Waves. This is based on the theory of one named Elliot. It is lays the concept on the wave patterns and the Fibonacci number. To use this tool you should follow five-wave incline pattern and three-wave decline pattern.
6) Moving Average Convergence Divergence (MACD). It is basically a line which exposes the differences between exponential moving average and the signal line. Signal line also called trigger. You might wonder what the use of it. You can read that there will be a change on the trend if the MACD lines cross over the signal line.

Those are the most common tools you have to understand.

No comments: