Technical forex trading is an integral technique for forex trading. It enables you to identify market movements, trends and to make good profits when trading.
When you decide to become a technical forex trader, there are many terms and words that you should always have in mind. Words that you must know as they define and describe tools and techniques you will use to succeed as a forex trader.
Here are some of the terms you need to know as a technical forex trader.
This is a trading technique that requires the trader to use tools to analyze the historical data of a currency pair. This analysis then helps you as a trader to predict the price movement. This helps you to make the right trading decision that leads to a profitable trade.
Trading indicators are mathematical formulae that can be plotted on your trading charts to help you predict the next movement of price for a currency pair. Examples of indicators include moving averages, Bollinger bands, Fibonacci, Stochastic indicators, and many more.
A leading indicator is an indicator that uses historical price data to predict future prices.
Fibonacci retracements, support and resistance levels, and client sentiment levels are a key example of leading indicators.
Lagging indicators use historical price data to confirm a current movement in the price of a currency pair. Traders use them to enter a trade after they have confirmed the current price movement.
Example of a lagging indicator includes stochastic oscillators, MACD, and Relative Strength Index.
This is a general direction in which the forex market or a particular currency pair is moving. Trend movement in the forex market can be upwards, downwards, or sideways. As a forex trader, you need to know the market or price of a currency pair movement. Once you have identified it, you now have to trade in the direction of the trend.
This is the most commonly used chart to analyze markets. Every forex trading platform has candlestick charts that you can use to analyze the market and currency pairs before you get into a trade.
This is the lowest point that a currency pair price can go. Technical forex traders use indicators to identify the support position. At the lowest price, the price can start moving up. The support position is an appropriate level for the trader to get into a trade in a buy position. This enables the trader to make a profit as the price of their currency pair rises.
This is the highest price point of a currency pair movement. As a trader, you can enter take a sell position at the resistance level to make a profit when there is a price reversal for the particular currency pair.
A bearish market is a market where prices are falling. In forex trading, a bearish market is when the prices of currency pairs are falling. As a trader, you need to identify the resistance point of a currency pair and get in as the prices in the market start to fall.
A bull market refers to a market in which prices are rising. This means that, as a trader, you need to enter the market as the low prices are reversing and the prices start rising to profit.
Oscillators are forex trading indicators that as their name suggests oscillate between the high and low points of a graph. They show when a currency pair is either overbought or oversold.
Technical trading tools that indicate a standard deviation on a chart to indicate how prices of a currency pair are moving. It is used to help you decide whether prices are high or low. As a trader, this ensures that you make the right trading decision to make a profit.
Every industry has its jargon. In forex, you need to know the technical words used in the trading process. This ensures that you have the knowledge you need to be a profitable trader. In forex trading, the more you know about the trade, the better you are as a trader.