Patterns and forecast methods used today
Basic Forex forecast methods:
Technical analysis and fundamental analysis
This chapter and the next one provide insight into the two
major methods of
analysis used to forecast the behavior of the Forex market.
Technical analysis
and fundamental analysis differ greatly, but both can be
useful forecasting
tools for the Forex trader. They have the same goal - to
predict a price or
movement. The technician studies the effects, while the
fundamentalist
studies the causes of market movements.
Many successful
traders combine a
mixture of both approaches for superior results.
If both Fundamental analysis and Technical analysis point to
the same
direction, your chances for profitable trading are better.
In this chapter…
The categories and approaches in Forex Technical Analysis
all aim to support
the investor in determining his/her views and forecasts
regarding the
exchange rates of currency pairs. This chapter describes the
approaches,
methods and tools used to this end. However, this chapter does not intend to
provide a comprehensive and/or professional level of
knowledge and skill, but
rather let the reader become familiar with the terms and
tools used by
technical analysts.
As there are many ways to categorize the tools available,
the description of
tools in this chapter may sometimes seem repetitive. The
sections in this
Some other popular technical tools:
Coppock Curve
is an investment tool used in technical analysis for
predicting
bear market lows. It is calculated as a 10-month weighted
moving average of
the sum of the 14-month rate of change and the 11-month rate
of change for
the index.
DMI
(Directional Movement Indicator) is a popular technical
indicator used to
determine whether or not a currency pair is trending.
The Parabolic System (SAR)
is a stop-loss system based on price and time. It
is used to determine good exit and entry points.
You are almost ready to trade in real-time, but you want to
discuss
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