Technical Analysis depicts historical prices and analyses the daily traded volumes in bid to endeavor current price trend. They use high end graphs and chart with the extract the information with the help of certain indicators and patterns. This helps the traders to identify buy and sell opportunities. Technical Analysis is done through Indicators and Charts.

Technical Indicators

Technical and Economic Indicators helps the Forex traders to identify the trading style which helps them to get a quick view about the FX markets before they start trading.

Chart Patterns

The Forex and Capital Markets trader use various types of pattern that help them to detect future price movements. This pattern may be bullish, bearish or unaligned.

Type of Charts

Bar Charts

Bar charts provide traders with four key pieces of information for a given time frame: the opening price during that time frame; the closing price; the high price; and the low price. Bar charts can be applied to all time frames, and hence a single bar can summarize price activity over the past minute or over the past month. Different traders use time frames in various manners, although a good rule of thumb is that the longer the time frame, the more significant it is as it will account for more data — and hence will be a better reflection of the market’s psychology.
technical-analysis
candlestick-chart

Candlestick Chart

The candlestick charts were invented by the Japanese in the 1700s. Just like a bar chart, a candlestick contains the market’s open, closing, low and high price of a specific time frame. The main difference is the candlestick’s body part, which represents the range between the opening price and the closing price of that particular time frame. When the body part is filled with red (or black), it means the closing is lower than the opening. When the body part is filled with blue (or white), it means the closing is higher than the opening. While the bar charts put more emphasis on the progression of closing price from the last bar to the next, while the candlestick charts put more emphasis on the relationship between the opening and the closing price within the same time frame. Above and below the candlestick’s body are the ‘wicks’, while the wick on the top is the highest price and the wick at the bottom is the lowest price of that period. Candlestick charts are more popular than the bar charts and the line charts, because they tend to be more visually appealing.

Line Chart

Unlike bar and candlestick charts, line charts present much less information; they only show the closing price for a series of periods. As a result, line charts serve best to measure the overall direction of long-term trends, and hence are of limited used for most traders.
line-chart

Economic Indicator

Most economists talk about where the economy is headed – it’s what they do. But in case you haven’t noticed, many of their predictions are wrong. For example, Ben Bernanke (head of the Federal Reserve) made a prediction in 2007 that the United States was not headed into a recession. He further claimed that the stock and housing markets would be as strong as ever. As we know now, he was wrong.

Because the pundits’ predictions are often unreliable – purposefully so or not – it is important to develop your own understanding of the economy and the factors shaping it. Paying attention to economic indicators can give you an idea of where the economy is headed so you can plan your finances and even your career accordingly.

There are two types of indicators you need to be aware of:

  • Leading indicators often change prior to large economic adjustments and, as such, can be used to predict future trends.
  • Lagging indicators, however, reflect the economy’s historical performance and changes to these are only identifiable after an economic trend or pattern has already been established.

Leading Indicators

  • Stock Markets
  • Manufacturing Activity
  • Inventory Levels
  • Retail Sales
  • Building Permits
  • Housing Markets
  • Level of New Business Startups

Lagging Indicators

  • Changes in the Gross Domestic Product (GDP)
  • Income and Wages
  • Unemployment Rate
  • Consumer Price Index-CPI (Inflation)
  • Currency Strength
  • Interest Rates
  • Corporate Profits
  • Balance of Trade