Best technical analysis strategy

Technical analysis is your guide as a trader in forecasting future trends, owing to past information. Technical analysis makes use of charts to get hints on price movement. The first step as an upcoming trader is to understand technical analysis strategy that works well for you, without letting your emotions interfere with your trading decisions.

The forex technical analysis strategies take the shape of forex indicators and are the tools traders use to get a clear picture and perspective of the market. Ideally, the indicators give a long term or short term glimpse of how your currency pair is fairing on in the market and even its historical performance.

What are the best technical fores trading & analysis strategy?

When it comes to forex trading, no one technical analysis strategy can be termed as the best of best. Past experience indicates a combination of various strategies to get the desired results. Traders differ in terms of personal style, personality, psychology, and so each trader will tend to rely on the indicator that suits their preference.

That notwithstanding, lets offer some insights on a couple of indicators for technical analysis.

·         Moving Averages

The Moving averages technical indicators are used in both identifications of the market direction and price action breaks. A moving average is represented in the form of a line drawn on a chart. The line is used to get the average value for a currency pair within a specified timeframe. The advantage of moving averages, it gives you the trader a sneak preview of the general market trend for your currency pair. The moving average is also a perfect fit for long-term periods like the position traders. In short-term timeframes, moving averages may reveal faster reaction to price changes within the market.

Some downside for you to note is that the moving average is based on historical data thus a bit slower in responding to evolving market conditions that happen pretty fast. Also, given its long-term preference, if you are working on a short-time frame, you may have problems deducing helpful data on a simple moving average in which case on an exponential moving average may be preferable.

·         Bollinger bands

Bollinger bands are widely used thanks to their simplicity nature. Typically, if your currency pair falls above the moving average, the Bollinger bands values form at 2 or 2.5 standard deviations from the moving average and signifies commencement of a new trend.

One main advantage with using Bollinger bands is that its width gives an easy visual impression of rate of volatility in the market. The bigger the distance between the two bands, HIGH volatility and when the bands contract, LOW volatility.

The downside though; Bollinger bands represent past information. It can be quite an uphill task to use them to forecast on future market trend predictions. Breakout opportunities could pass just like that. In this regard, they are most ideal when used together with other technical indicators.

A quick note;

·         Pick and develop a trading strategy that suits you perfectly

·         Track and monitor trades

·         Make use of additional software tools to maximize your performance

Conclusion

Forex trading is an art and science in itself. As traders, using indicators helps in summarizing data on prices, signals trend direction, and more. Depending on your preference, the indicator that works for you may not work for the other trader. The trick here is learning how to use a combination of the right tools, to develop a working system for you and to align you with the forex market.