The Importance of Chart Patterns and Technical Indicators in Forex Trading

The price and market in forex trading are always changing. We can’t predict what will happen next. The price that seems stable could be down to the lowest point in an instant. Having a deep knowledge about chart patterns and technical indicators is essential in forex trading.

These aspects could determine the success and failure. Keep an eye on the chart patterns and technical indicators to avoid the big loss.

Chart Patterns

As a professional trader, always remember that the patterns can easily change at any moment. Well, it’s very normal in forex trading. When big money is included in a deal, the pattern can easily derail from its perfect track. The chart patterns and Candlestick Patterns often save us from a big loss if we can read it well. It gives us precious early warning sign about the potential trade. In this article, the example is the triangle pattern. It important patterns that give big assistant in forex trading.

The first is the symmetrical triangle. It can give us an insightful view of the existing trend. It provides the vision that the market remains the same and no major deals happen to disrupt the direction. The symmetrical triangle represents the calm water. It’s when the market is unsure to increase or decrease the price in established range.

The next is ascending triangle. It means that the market demand for buying is greater than selling. The money is on the buy side, so we can expect a surplus potential deal in this case. The price will be higher for sure. The market doesn’t stand still if there is a big amount of money floating on the range.

On the contrary, the descending triangle is the opposite of the ascending triangle. All things about the ascending triangle are reverse in here. But always keep in mind that there is nothing such as guarantee in forex. It’s dynamic and always changing.

Technical Indicators

Technical indicators also play an important role just like the chart patterns in forex trading. With simple mathematical tools, it becomes an important aspect to consider when trading forex.

There are several indicators available on the screen. What is the best then? Well, the answer is none of them is the best. As stated earlier, the world of forex trading is dynamic. It’s always changed and unpredictable. Indeed, there are several types of the indicator and they have its own characteristic. For a particular chart, different indicators can give various significant. For example, an oscillator is the best partner for ranging markets.

The best way is to combine all indicators to get a complete picture of the market. It might take time, but it provides a complete view of the current condition of the market.

There are four major indicators in the forex. The first one is oscillators. Like its name, this indicator oscillates between two constant points. In other words, it moves back and forth within the range of overbought and oversold levels. These signals are the best for the ranging markets. Oscillator supposed to be the early warning signal about the price movement.

The second indicator is moving averages. Once again, remember that the price movement is very unpredictable. It’s very chaotic even on a normal day. The moving averages purpose is to press out those extreme fluctuations. Therefore, the trader can evaluate the market trend for the potential deals.

The moving averages can also be an instant trend predictor. For the trader, this indicator is the source to search the significant price in the market.

Pivot points are the next indicators. It includes the average of previous high, low, and closing prices. It’s a great indicator to predict the future price. If the pivot point is hit in the upward direction, we can expect the rise of the price soon and vice versa.

The fourth indicator is the Fibonacci. Yes, its Fibonacci numbers that discovered in 15th century by Leonardo Pisano. We need to consider the Fibonacci retracement and extension levels in forex trading. Fibonacci retracement happens when the market shows the market reaction of a price movement. On the other hand, Fibonacci extension occurs when the trend is going underway.

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