Using Technical Analysis When FX Trading in the US Market

LONDON, February 24, 2012 /PRNewswire/ --

One of the more utilized means of analysing and making trades on the Forex market is through technical analysis.

Forex Trading is one of the most widely traded markets in the world while all the major currencies typically trade against the US Dollar (USD).

As one of the largest and most liquid markets, the Foreign Exchange (often referred to as Forex, retail forex or simply FX) market is also one of the most accessible.

Trading 24-hours a day from Sunday evening until Friday night with FX Solutions means you can trade the opportunity as you see it.

Whether you're after short-term volatility or long-term price trend, you can trade FX based on technical or fundamental analysis - or both.

Technical vs. Fundamental

Compared to fundamental analysis, technical analysis ignores fundamental factors like news and economic conditions, and is dominantly applied only to the price action of the market.

Forex technical analysis primarily consists of a variety of forex technical studies, each of which can be interpreted to help assess market direction or to generate buy and sell signals.

A basic premise of fundamental analysis as to trading Forex is that the value of a currency is determined by the comparative strength and weakness of a country's economy in relation to those of its trading partners. 

Here we consider how traders use technical analysis to trade forex.

The Trend

One of the first things you'll hear when learning about technical analysis is: "The trend is your friend."

Establishing the current trend may help traders to become conscious of the market's general direction. To help in identifying the longer-term trend; daily, weekly, and monthly charts may be appropriate.

Trend Lines and Channels

Trend lines may be both simple and effective tools in clarifying the direction of trends in the market.

An upward straight line is drawn by connecting at least two successive lows, but preferably more.

Each successive point generally should be higher than the previous one. The prolongation of the line helps determine the path along which the market may move.

An upward trend is a solid method to recognize potential support lines/levels.

On the other hand, downward lines are also charted by connecting two points or more. The validity of a trend line may be partially associated to the number of connection points.

Drawing Tools

Similar to analysis tools, technical drawing tools - aside from the aforementioned trend lines and channels - are both popular and diverse.

Most of these drawing tools are meant to identify areas of importance, including support and resistance levels.

Trend lines, whether diagonal or horizontal, are the most basic drawing tools. From there, they become more and more complex, and often originate from complicated mathematical foundations.

Summary

Whilst technical analysis is one of the more utilized means of analysis when FX trading, you may want to consider fundamental analysis as an option too. With this in mind, some traders prefer to combine aspects of both. You can find out more about trading Forex with FX Solutions here: http://www.fxsolutions.com/trade-forex/

Forex trading involves a substantial risk of loss and is not suitable for all investors.

About FX Solutions:

FX Solutions, LLC is a leading foreign exchange broker with a focus on advanced trading technologies, transparency of transaction and unparalleled customer service. FX Solutions serves retail clients institutional trading partners and introducing brokers in over 100 countries.

For more information, please visit http://www.fxsolutions.com/

SOURCE FX Solutions