Becoming Technical Analyst
The first step in becoming a successful technical analyst is to learn how to read forex charts. Outlined below are some simple steps that every trader should take when first starting out with technical analysis. When analyzing a currency pair you will need to look out for a prevailing trend.
How to Identify Trend
To identify a trend simply look at the graph presented before you and decide whether it is rising more than it is falling, or vice versa. Trends can be shallow or sharp, weeks short or years long. Practice identifying trends and locating the moment where the trends change direction.
Even if you are a short-term scalper or day trader who wishes to place a trade for no longer than an hour, it is still important to identify trends. Identifying a trend is one of the best steps a trader can take in executing more accurate, profitable trades.
Identifying Support & Resistance Levels
After this point you will then need to
locate the support and resistance levels. In technical analysis these
are regarded as the ‘floor’ and ‘ceiling’ points on a graph and are key
locations on a chart where the price continually refuses to break
through. The price will reach a peak or a valley, after which point it
will not go any further, but will instead alter its direction. The more
frequently this occurs, the stronger the support and resistance levels
are.
Draw a straight line as you pass through most of the support points. Draw another line as you pass through most of the resistance points. This provides you with a lucid picture of the price channel, or the path that the currency pair’s trend is following. This is a highly powerful yet incredibly simply tool for determining a currency’s future pathway.
