Forex Signals

Written by Jacey Harmon
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Forex signals can be summed up in a single term: technical analysis. Technical analysis is the study of market generated data with the purpose of predicting future market direction for a selected currency. The most common type of data used with forex technical analysis is the price data generated by the trading of currency on a particular market.

Price data can be seen in the form of charts. Charts are a visual representation of the price history of a currency. Charts allow an investor to see exactly where the currency is trading. A trader can see if the selected currency is trading in an up trend, down trend, or in a sideways holding pattern. Pretty much any type of forex trader will utilize some sort of technical analysis.

Technical analysis requires the trader to take on a certain amount of assumptions. For starters some technicians believe that the market is efficient in pricing a currency. Therefore they believe that fundamental analysis is not required as the market has already priced in all the available data. Since the markets are driven by human emotions and emotions never change a trader can identify successful patterns in a chart that have occurred in the past.

Other Technical Forex Signals

There are a variety of other technical indicators that a forex trader can utilize. Strength indicators show a currencies strength by measuring the activity and participants in the market. Volatility indicators show the size of day to day price swings. High volatility tends to signal a price change. Support and resistance indicators study where a currency has either bounced off of (support), or traded off of (resistance) historically to time potential trades.

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