Technical analysis in the forex market



The foreign exchange market (“Forex”) is the largest market in the world, and increasing in popularity.  Forex trades are based on currency pairs and are made to take advantage ofminute changes in the exchange rates, with prices changing very quickly.  In such a fast changing market, an investor needs to have a good trading strategy to make sound decisions. Since the Forex market is open 24 hours a day, six days a week, there is a vast amount of data to process.  Technical analysis tools have become vital in making decisions based on the available data. Even cable ties companies do worry about the Forex market and they engage themselves in technical analysis. While doing export and import the forex market become the focus point in terms of revenue. These trading companies keep a tight watch on foreign exchanges so that their revenue stream doesn’t get hampered with Forex fluctuations.

Technical analysis tools include tables, charts and indicators.  The data used for technical analysis can be based on intervals from seconds to months.  Indicators are used by traders to determine which way currency pairs are trending, or if they are range-bound.  The indicators used in Forex trading are mostly the same as those used in stock market or other market investment arenas.  These include candlestick bars, moving averages, stochastics, the relative strength index (“RSI”) and moving average convergence divergence (“MACD”).  Other popular indicators for Forex investors include correlation coefficients, Fibonacci retracement and pivot points.  The indicators can be simple or based on complicated formulas. Definitions of these indicators can be found at The indicators show investors resistance or supports to price movements, and trends in the market.

Many websites and brokerages offer software tools to plot these technical analysis indicators for investors to use in making their investment decisions. The software tools available include automatic charting of price and indicators. One of the simpler indicators is the candlestick bar.  Candlestick bars indicate the opening price, the high price, the closing price and the low price.  Charting software tools can automatically plot the candlestick bar based on daily prices. In another example, some charting tools allow a user to do automatically do a Fibonacci retracement by dragging their cursor between the two points to be used in the analysis. Some charts allow multiple currencies to be plotted on the same charts.

Technical analysis software tools are generally provided free to traders through their brokers. Another platform for the tools is informational sites such as, and the Forex beginner’s website Software companies are also developing tools that can be used alone or integrated with brokerage trading platforms.

Some Forex software products gather all of the information and tools a trader could need, such as charts, news, simulators and signals of when to trade in one place. A few software tools, such as FXCM and TradeInterceptor, allow traders to make trades directly from charts instead of toggling back and forth between charts and their trading platforms. These companies, as well as others, also have mobile technical analysis tools.  Trade Interceptor’s platform includes a multi-broker interface allowing traders to manage multiple brokerage accounts from one interface.

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(“Forex” image courtesy of Shutterstock)

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