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Lesson 10.9 – Candlestick Charts

Candlestick charts were invented by a highly successful Japanese rice trader in the late 1700’s. They have been used widely in technical analysis since Charles Dow reintroduced them to stock traders in the early 1900’s. The idea behind the charts consists of conveying as much information as possible in the available space. Also, each candlestick or […]

Lesson 10.8 – Moving Averages

Moving averages are computed by taking an average of the exchange rate for a particular period of time and then allowing it to evolve or move forward over time.   Figure 1: A daily bar chart for the EUR/USD currency pair with a 10 day simple moving average drawn in red and a 20 day simple […]

Lesson 10.7 – Continuation Patterns

The most common continuation patterns used in Forex technical analysis consist of flags, pennants and gaps. These classic continuation chart patterns generally indicate or help confirm that the major trend will probably continue. Continuation patterns differ from the primary reversal patterns, such as the head and shoulders top and bottom pattern for example, which indicate […]

Lesson 10.6 – Support and Resistance

Determining the levels of support and resistance for a currency pair is one of the key concepts of modern forex technical analysis. This type of chart analysis provides invaluable information for most short and medium-term trading strategies. Support and Resistance Defined Support consists of the levels on a price chart where the currency pair has […]

Lesson 10.5 – Breakouts

Breakouts to a technical trader mean exceptional trading opportunities, primarily because it signals that the exchange rate has broken out of its normal trading range. To be considered confirmed, breakouts generally need to occur with an accompanying increase in volume. Breaking Support and Resistance Identifying support and resistance levels makes up the first step in […]

Lesson 10.4 – Reversal Patterns

A reversal pattern is just that, a pattern on the price chart or a currency pair that would indicate an interruption in the overall trend and that a reversal in the price’s general direction is ready to ensue. Along with continuation patterns, reversal patterns make up some of the most widely watched configurations seen on […]

Lesson 10.3 – Trends

To a trader, correctly identifying trends in the market would be considered the ultimate edge in trading since following trends represents one of the most profitable trading opportunities provided by the Forex market. Accordingly, identifying and trading along with the direction of the trend until it reverses and a new trend ensues is a prime […]

Lesson 10.2 – Interpreting Charts

When interpreting price charts, technical analysts typically use a variety of well established techniques. These might include drawing trend lines or channels to identify trends, recognizing classic chart patterns and classifying the market’s observed price action according to type. Trend Identification Trends consist of a series of higher highs and higher lows, for an upwards […]

Lesson 10.1 – Chart Types

Technical analysts use a variety of price chart types to analyze the action of currency exchange rates. They typically use these charts to look for trends and other key chart patterns that will help them forecast upcoming exchange rate movements. The data used to create these charts typically contains opening, closing, high and low prices […]

Lesson 10 – Key Technical Factors

Technical analysis does not take into account any of the aforementioned fundamental factors, but instead relies solely on technical data obtained and computed from market observables like price, volume and open interest. The basic premise of technical analysis assumes that all available fundamental information is already reflected in the exchange rate for a currency pair. […]