FOREX ANALYSIS MADE EASY

FOREX analysis is an aspect of strategy and techniq to find the next price movement before the trader opens a position selling / buying. There are a variety of strategies, techniques, Indicator, and various types of chart will be using by traders.

YES! There are no 100% guarantees when it comes into investing and trading, but there are solutions that minimize the risk for the profit, when you knew the approaches. (Please do not involved, if you have no encouragement and you are a lazy reader)

‌as a Forex trader it is important and requires a basic knowledge of Forex, training, experience (such e.g backtest in demo account) and effort (not to blindly open position is like a gambler).

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  • ‌STRATEGY is an organized plan to achieve the goals or success. The strategy also represents the wisdom to choose the approach, as well as the efficiency of the technique or method based on trade objectives. Traders need to be good at taking OPPORTUNITY TO ADDRESS RISK.

     

    ‌BASIC FOREX TREND ANALYSIS

    FOREX GOLDEN RULES
    1. “Follow the Trend” – Never against the trend. UPTREND : BUY only DOWNTREND : SELL only
    2. “BUY” on the SUPPORT or RBS (Become Resistance Support)
    3. “SELL” on the Resistance or the SBR (Support Become Resistance).

     

    1 – SUPPORT AND RESISTANCE (SNR)

    Key to the foundation of the analysis that includes Technical Analysis and Fundamental Analysis.

    It is based on the concept of supply and demand. Fail to understand this basic SNR will give a negative impact on the trading.

    »When Demand is Increase (uptrend) and supply is Decrease (Downtrend): The Price Will Rising.

    »When the Supply is Increase (uptrend) and Demand is Downtrend : The Prices Will Decline.

    ‌Therefor, to measure the stronger “supply” and “demand” is to identify from support and resistance levels.

    SUPPORT: the Level, the point or price, at the lowest movement before it goes Uptrend.

    RESISTANCE: the Level, the point or price, at the highest movement before it goes Downtrend.

     

    1.1 – BENEFITS AND PRIORITY SUPPORT & RESISTANCE
    Is to determine the trend of price movement which includes the strategies of;

     

    BREAKOUT FOREX TRADING : the movement penetrated area (trendline) Support or Resistance as confirmation that Support or Resistance level is still strong.


    1) If the price movement through the resistance line, the market trend is bullish (up).

    2) If the price movement through the support line, the trend of the market is bearish (down).

     

    BOUNCE / REVERSAL FOREX TRADING : Which is a reflection@reversal of the movement area (trendline) at Support or Resistance as confirmation that level Support or Resistance level have reached overbought or oversold.


    1) If the price action bounces against the Resistance, the market trend is bearish and the market will tend to chase down support.

    2) If the price action bounces against the Support, the market trend is bullish and the market will tend to catch up resistance.

     

    2- PHENOMENON OF REVERSAL

    Reversal occurs when the price movement of “Support or Resistance” have turned the function on one line or zone known as SBR (Support become Resistance) and RBS (Resistance become Support).

    ‌SBR
    Price success breakout at “Support” and form a New Support level (below earlier Support level). Price then retrace back to the earlier Support level but unsuccessful break, then the exchange functions on the earlier level become as “Resistance”.

    ‌RBS
    Price success breakout at “Resistance” and form a New High Resistance level (above earlier Resistance). Price then RETRACE back to the earlier resistance level but did not succeed break, then the exchange functions on the earlier level become as “Support”.

     

    3- PIVOT POINT

    The analysis technique which popular in measuring  SUPPORT & RESISTANCE level. the Pivot Point calculation are;

    R3 = High + 2 x (PP – Low)
    R2 = PP + (High – Low) = PP + (R1 – S1)
    R1 = (PP x 2) – Low
    PP = (High + Low + Close) / 3
    S1 = (PP x 2) – High
    S2 = PP – (High – Low) = PP – (R1 – S1)
    S3 = Low – 2 x (High – PP)High : higher price on previous date.
    Low : the lowest price on previous date.
    Close: the close price on previous date.

    Example calculate Pivot Point:

     

    3.1 – THERE ARE 3 TYPES OF PIVOT:

    Daily: Used to H1. If the H1 candle close below the pivot, the trend is a downtrend and vice versa.
    Weekly: Used to D1. If D1 weekly close below the pivot, the trend is a downtrend and vice versa.
    Monthly: Used to W1. If W1 close under Monthly pivot, the trend is a downtrend and vice versa. * Monthly pivot are rarely used because it is too large timeframe for scalping.

     

    3.2 – TIME FRAME (TF) FOR ANALYSIS.

    • Minimum M15 (TF M1 is not recommended because most “False Signal”).
    * Smaller TF = Stop Loss Small = Target Profits Less (according to the ⓘScalper FX).
    • Lager TF = Stop Loss Bigger = Big Profits Target. Trends through;

    Daily / Weekly = if trade in H4 TF
    H4 / Daily TF = if trade in H1
    H1 / 4 HR = if trade in TF M15.

     

    4- ANALYSIS OF FOREX
    It is divided into two : Fundamental Analysis and Technical Analysis

    i. FOREX ANALYSIS ⓘFUNDAMENTAL
    Is a technical analysis through ECONOMIC NEWS (the economic, social and political on the supply (supply) and demand (demand)) indirectly affect the price of the Forex market.

    ECONOMIC NEWS movement through the market does not last long, when the economic news announced, market/price will caused sudden SPIKE or STEPPING.

    But the price will move to the previous track, which follows the trend! Take Advantage on Economic Calendar Forex News website:

    forex factory.com/calendar.php
    dailyfx.com/calendar
    (This page has accuracy for economic analysis).

    Note: the news times followed New York in the United States (a difference of around 12-13 hours later than GMT + 8 hours Malaysia time).

    *During Economic News Release only those Forex’s traders are really proficient in fundamental analysis will perform a trade.

    The FUNDAMENTAL factors influencing currency/market price;

    USD
    • USD is influenced by the price of gold.

    • If the USD price a rises, the price of gold will fall, and vice versa.
    • The USD price is under USD Index.
    • USD is affected by the stock market and bonds.
    • US economy dependent on imported oil. The change in oil prices will affect the value of the USD.
    EUR
    • European Union (EU) consists of 15 countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden & amp; UK. All countries using the euro as a major currency except Denmark, Sweden and the UK.

    • Economic news is the most important of the German states, France and Italy.
    • The movement of EUR / USD is very important to measure the strength and weakness of the EUR and USD currency.
    GBP
    • GBP is directly proportional to the price of energy. (Energy)
    • Most EU countries import oil from the UK. If oil prices rise, the EU countries have had to buy more GBP and used to buy the oil.
    • Increasing oil prices will benefit and increase the income of the UK in energy export sector.
    • The strength or weakness of the GBP can be seen clearly in the EUR / GBP. Movements in the EUR / GBP influence the movement of GBP / USD.
    JPY
    • The Bank of Japan (BoJ) is trying to weaken the Yen as if the Yen stronger and stronger, it will affect Japanese export sector due to higher product prices.
    • Japan is heavily dependent on imported oil. High oil prices will be a barrier to production and economic developments in Japan because the prices of inputs and raw materials will be more expensive.
    • The movement of EUR / JPY can affect or be affected by the USD / JPY. GBP / JPY and AUD / JPY also can give kean to EUR / JPY and USD / JPY.
    CAD
    • Gold Producer’s 5th largest & oil produce to the 14th largest in the world. Therefore, changes in the price of gold and oil will affect the CAD.
    • The CAD price is directly proportional to the commodities (oil & Gold). If commodity prices rise, the price of CAD will also increase and vice versa.
    • Economy Canada is very sensitive to changes in the US economy. If the US economy deteriorates, it will negatively affect Canada’s economy because companies from the US will reduce the activity of importing materials from Canada.
    CHF
    • Switzerland is the holder / storage unlawful gold 4th largest in the world. • If the gold price strong CHF will also be strong.
    AUD
    • Australian gold producer in the 3rd world. When gold prices rise, AUD prices will also rise. NZD
    • NZD directly proportional to the AUD.
    • If the price of a commodity (gold) strong CHF will also be stronger.

    The FUNDAMENTAL News Economic which caused huge impact of market ( traders have to be smart to take a chance & handle risk for huge profits or huge losses ).

    USD
    ° Non-farm employment change (NFP) -Every First Friday of the month.
    ° Gross Domestic Product (GDP)
    ° Retail Sales
    ° Consumer Price Index (CPI)
    ° Personal Consumption
    ° Expenditure University of Michigan Consumer Sentiment °
    Euro
    ° Gross Domestic Product (GDP)
    ° Consumer Price Index (CPI)
    ° Employment Change German

    ° Industrial Production Budget Deficits

    GBP
    ° Unemployment Rate
    ° Consumer Price Index (CPI)
    ° Gross Domestic Product (GDP)
    ° Purchasing Managers Index (PMI)
    ° Gfk Consumer Confidence report.
    JPY
    ° Gross Domestic Productt Tankan
    ° SurveysUnemployment Rate
    ° Consumer Price Index (CPI)
    ° Core Machinery Orders

    CAD
    ° Consumer Price Index (CPI)
    ° Gross Domestic Product (GDP)
    ° Trade Balance ° Ivey Purchasing Mangers’ Index (PMI)
    ° RISK MANAGEMENT [Mone Management]

    CHF
    ° Gross Domestic Product (GDP)
    ° Retail sales Consumer Price Index (CPI)
    ° Balance of Trade
    AUD
    °Consumer Price Index (CPI)
    °Balance of TradeGross Domestic Product (GDP)
    °Unemployment Rate NZD
    °Gross Domestic Product (GDP)
    °Consumer Price Index (CPI)
    °Balance of Trade.

     

    ii. FOREX TECHNICAL ANALYSIS
    Past price movements are calculated using SUPPORT & RESISTANCE, PIVOT POINT or use FX INDICATOR to forecast the next price movement. Technical analysis are divided into:

    ° TECHNICAL CLASSIC: analysis through the Support & Resistance [SNR] along trendline as already explained as above. It is also called as “Price Action @ Naked Trading”.

    ° TECHNICAL MODERN: analysis with the use of FOREX INDICATOR. Is a modern technical analysis. The most popular used by traders includes:

    1. Bollinger Bands [BB]: two lines that are at a certain standard deviation from the midline. Bollinger Bands are used to determine the high and low of a price. This indicator will be widened when prices fluctuate, and will be narrowed when prices move sideways relative. Use BB: If the price reaches the line on the time for us to sell. Vice versa, if the price touches the bottom line, the time to buy. But it should be noted that if prices come off from the line chart above or below, the price movements are likely to continue the trend.

    2. Stochastic Oscillator [SO]: which shows the position compared to the last closing price of the lowest or highest price range for a certain period. Use SO: When prices in the Stochastic is above 80 (overbought) = ready to SELL (sell), when the price is below 20 (oversold) = ready to BUY (buy). Similarly viewed from the% K and% D. If the% K crosses% D upwards, it means that the time to buy. And if the% K crosses% D down means it’s time to sell.

    3. Moving Average: or MA used to calculate the price movements in a period of time. Typically used within 5 days, 10 days, 20 days, 50 days, 100 days, or 200 days. There are 4 variations of MA used in technical analysis:

    »Simple Moving Average (SMA)
    »Linear Weighted Moving Average (LWMA)
    »Exponential Moving Average (EMA)
    »Smoothed Moving Average (SMMA)

    4.Moving Average Convergence Divergence: the trend is going. There are two lines of Signal line and the MACD line. The signal line is usually red, calculated over a period of 9 days, while the MACD line is calculated from the reduction for 26 days and 12 days. MACD can also be used to determine the duration of the BUY (buy) or SELL (sell). Use MACD: MACD When the MACD line crosses posirif and signal line from bottom to top then it’s time to buy and if negative MACD and the MACD line crosses the signal line, it’s time to sell.

    5. Relative Strength Index: indicator that tells us momentum or strength of a movement / trend of the market. Below is the formula for calculating. RSI has a presence, which is 0 – 100. A trend is considered “overbought” by traders when reading in RSI shows 70 and above, and “oversold” when the RSI shows 30 down.

    6. Williams% Range: When the price of a very high, above -20, then it’s time to sell and if the price is very low, below -80, it’s time to buy.

    * There are various Forex Indicator is provided. Increase training in DEMO ACCOUNT @backtest to understand more on the use of Modern Tech.

     

    Next Tutorial : FOREX STRATEGY & TECHNIQ







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    3 thoughts on “FOREX ANALYSIS MADE EASY

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