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How To Master Technical Analysis Trading Forex

Technical analysis involves looking at charts and using indicators along with various strategies to determine the next price move. It can be hard to know where to start if you’re new to this form of analysis, so read on for a clear and simple guide to conquering the charts.

SageFX - Sep, 29, 21

*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Mastering Technical Analysis

There are a few broad types of analysis that traders use to make sense of market data. One of the most common, and sometimes most daunting, is technical analysis, or the notion that “it’s all in the charts”.

Principal Points

  • What is Technical Analysis?
  • What’s Involved in Technical Analysis?
  • How to Make the Most of Technical Indicators
  • Technical Analysis with SageFX

What is Technical Analysis?

Elements of technical analysis appear as far back as 17th-century Dutch trading and the 18th-century Japanese rice trade. It derives from the idea that history will repeat itself, and that the study of price history offers insights into future price action. In its modern form, technical analysis is an integral part of any Forex platform’s software.

Technical analysis differs from fundamental analysis, which utilizes broader economic data over a longer term to make market predictions. Of course, a trader can and should use both because they offer complementary perspectives.

However, things are a little more complicated where sentiment analysis is concerned. This is because technical indicators and market sentiment are often inextricably linked. For example, the application of technical indicators actually depends on a level of psychological bias according to what you see in the market.

What Does Technical Analysis Involve?

Overall, technical traders love charts. They search for trends (upward, downward, or consolidating) in price action across various time-frames in order to decide whether to go long or short. Candlestick patterns, moving averages, and other trend indicators can all help you anticipate future price movements.

In addition to knowing when to buy or sell, you can also figure out how best to safeguard your trades. For instance, support and resistance zones can guide you to place your Stop Loss and Take Profit orders according to the market’s momentum. As a result, you can realize in plenty of time if your predicted trend has swung against you!

Moreover, there is a huge range of different chart and indicator combinations to be explored. Mastery of technical analysis means speaking the complex language of Bollinger Bands, Fibonacci Retracements, Heiken Ashi, and Ichimoku Kinko Hyo. But the important thing to realize is that you do not have to utilize or even understand every single technical indicator. Instead, it’s best to focus on what feels best to you over the appropriate timeframe.

How to Make the Most of Technical Indicators

These tips should help you keep cool and collected with your analysis:

  • You don’t have to use every tool in the box. Too many or incorrectly-placed indicators can just cause confusion. Make sure the tools you choose actually add to your perspective and don’t clutter it.
  • Take a step back. Sometimes looking at plain charts is enough to spot patterns, or to realize if your indicators are being forced to fit.
  • Understand the respective merits of your indicators. Some, like Simple Moving Averages, reflect long-term trends, whilst others, like Exponential Moving Averages, are better for spotting changes in the short-term. This means you need to tailor your time-frames according to your style of trading. 
  • Keep your mind open to other forms of analysis. It is best to look at the markets through different lenses in order to check your conclusions and refine your predictions. Remember: nothing is guaranteed in trading!
  • Practice, practice, practice. If you’re new to technical analysis, spend time in a demo platform to familiarize yourself with the placement of indicators and order entries. You can also back-test with historical market data to assess your interpretation of the charts and further consolidate your strategy.

Technical Analysis with Sage FX

Ultimately, the sophistication of your trading platform will dictate the success of your technical analysis. Luckily for you, Sage FX uses MetaTrader 4, the industry leader in technical capabilities. It boasts more than 80 pre-installed indicators, multiple chart views, and constantly updated features.

You can always open a Sage FX demo account to get to grips with analysis in MetaTrader 4 before you tackle the live markets. Meanwhile, keep your fundamental analysis insights up to scratch by checking out all our latest news updates.

Master technical analysis today! Sign up or log in to your Sage FX account now.