Forex Blog: Currency Trading News & Analysis.

March 5th 2008

Technical Analysis – The Basics

Yesterday, the Forex Blog featured a story that explained how to make money when volatility is low.  The consensus of the article is that investors must shift their strategy from trading to trending, which requires an adjustment in outlook from short-term to long-term.  But given that volatility is low and that currencies often move laterally against each other, how do you know which direction to bet on, and accordingly, when to buy or sell?  The answer requires some minor technical analysis, involving two of the most basic tools available: support and resistance. These terms represent approximate price levels within which a specific currency appears to be trading.  The significance of these levels is usually arbitrary, and is likely grounded in psychology rather than any real math. Furthermore, once the pattern is spotted, the support and resistance levels often become self-fulfilling, keeping the currency rangebound. But, when, for whatever reason, the currency dips below or rises above the range, it is probably a signal that it is a good time to sell short or buy, respectively. Trading Markets reports:

Though support and resistance are rather basic when it comes to technical analysis, they can be extremely effective for dexterous traders. And really, sometimes, keeping things simple is the best course of action anyway.

Read More: Using Support and Resistance in Forex Trading

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Posted by Adam Kritzer | in Investing & Trading | No Comments »

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© 2004 - 2024 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.