Video: Forecasting Trends to Trade Forex
Trends in Forex markets are easy to identify and even predict if one does one’s homework and combines both technical and fundamental forex trading indicators. Effective trend charting is a prerequisite for successful trading, and it’s not difficult to learn.
The simplest technical indicator to use is support and resistance – the lines in a chart that show the values, above and below which an asset’s price will not usually deviate. These are the values that represent an asset’s true worth in the eyes of most investors. Too high above that and buyers will soon stop buying. Too far below it and investors realize that others will soon want to get in on the action as the asset’s price start rising again towards its realistic value.
The second most popular technical indicator is the moving average. Moving averages are computed over a specified time frame. That way, they can filter out momentary deviations from a trend and reveal those trends more clearly. The length of the time frame selected determines how strong that filter is. By superimposing a long term moving average with a short term one, you should be able to predict how stable a price trend is or even if it’s about to reverse.
Fundamental indicators are easier to understand since they take their input from real world events that influence the economy. Thus, for example, improvements in a country’s economic growth or a rise in interest rates usually drive investors towards that country’s currency. Geo-political instability, on the other hand, will drive most investors away. Whereas most technical information may be derived from charts, with fundamental indicators one has to simply listen to the news, determine to what extent a country’s economy is influenced by current affairs and official announcements, and then translate that into market predictions. That’s why fundamental analysis might seem easier to understand, but it is often much more difficult to apply.
Nothing beats practice – especially when it comes to Forex technical analysis. Open an account now, access one of our many trading platforms and try out our charting tools to see how easy it really is.