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Forex Technical Analysis
Forex trading is a very dynamic area and for wise investing every trader needs to have
appropriate Forex skills and knowledge. However, there is no exact currency trading
technique for complete success in Forex deal, as every technique involves risk and none of these
systems can protect you from financial losses.
Relative Strength Index (RSI):
One of the most popular technical analysis indicators that helps to measure a current price power
in relation with previous prices is RSI /Relative Strength Index/. The RSI is a flexible tool, it can
be used to
 Generate buy/sell signals
 Show overbought/oversold conditions
 Confirm price movement
 Warn of potential price reversals through divergences
Moving Average Convergence Divergence (MACD):
MACD indicator is one of the simplest and most effective momentum indicators available. The
MACD line is the difference between two exponential moving averages and the signal or trigger
line, which is an exponential moving average of the difference. If the MACD and trigger lines
cross, this is taken as a signal that a change in the trend is likely. The MACD fluctuates above
and below the zero line as the moving averages converge, cross and diverge. Traders can look
for signal line crossovers, center line crossovers and divergences to generate signals. Because
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the MACD is unbounded, it is not particularly useful for identifying overbought and oversold
levels.
Gaps
A Forex gap most commonly refers to a difference of the price of a currency pair on the start of a
new trading week compared to price of the previous week’s closing. An up gap is formed when
the lowest price on a trading day is higher than the highest price of the previous day. A down
gap is formed when the highest price of the day is lower than the lowest price of the prior day.
An up gap is usually a sign of market strength, while a down gap is a sign of market weakness.
A breakaway gap is a price gap that is formed on the completion of an important price pattern.
It usually signals the beginning of an important price move. A runaway gap is a price gap that
usually occurs around the mid-point of an important market trend. For that reason, it is also
called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important
trend and signals that the trend is ending.
Trends
A trend refers to the direction of prices. Rising peaks and channels constitute an Up trend.
Falling peaks and channels constitute a downtrend that determines the steepness of the current
trend. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs
characterize a trading range. Moving averages are used to smooth price information in order to
confirm trends and support resistance levels. They are also useful in deciding on a trading
strategy, particularly in futures trading or a market with a strong up or down trend.
The most common technical tools:
 Coppock Curve is an investment tool used in technical analysis for predicting stand market
lows.
 DMI or Directional Movement Indicator is a popular technical indicator used to determine
whether or not a currency pair is trending.
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