Stages of technical analysis of the Forex market.
Technical analysis of the Forex market involves studying the dynamics of exchange rate movements.
This is why price charts for previous trading periods (timeframes) are used as its primary tool. Charts with timeframes ranging from five minutes to several years are used for analysis.
It's worth noting that charts with longer periods exhibit significantly less "market noise," or false movements. Therefore, they clearly show the prevailing trend lines, key chart patterns, and support/resistance levels. This allows for a relatively objective forecast of the most likely direction of exchange rate movements.
Experts in global Forex trading recommend conducting technical analysis every week before the start of the next five-day trading period. They divide this analysis into three stages.
1. Wave analysis of the market price movement of the currency pair selected for trading.
At this stage, the trader determines whether the price of the traded pair is currently in a corrective or impulse wave. If it is in a corrective wave, then which one – the second or the fourth? A graphical model of the correction's development is also determined. If the price is in an impulse wave, then which one is it in – the first, third, or fifth? The wave type is also determined, which can be simple or extended. It should be noted that accurately determining the current price position is the most important step in forecasting future price trends.
2. Graphic analysis of the price behavior of the traded currency pair.
At this stage, the Forex trader performs graphical constructions necessary to determine the most significant Forex levels - support/resistance, Murray, Fibonacci, and others, as well as to identify graphical patterns by which price movement develops - "descending and ascending triangles", "pennant", "wedge", "flag", "double and triple bottoms and tops", "head and shoulders", and so on.
3. Stage of market indicator signal analysis.
At the final stage of technical analysis, the trader takes readings of the market indicators used in a specific trading strategy ( Stochastic Oscillator , Accelerator Oscillator, MACD, Awesome Oscillator, Momentum, CCI, etc.), and also determines the behavior of moving average lines of different periods (Moving Average) relative to the price. The goal of the third stage of technical analysis is to confirm or refute the conclusions made in the previous stages Forex market indicator
