Global Currencies

6. Technical Evaluation

Technical Analysis

Technical analysis is a way to attempt to trade in the forex market by determining previous trends that have led to profitable trade. A technical trader gives more importance to studying the rise and fall of currencies on charts so as to determine the present and future developments of forex trade. This evaluation helps a trader settle on whether to stay entirely out of the market or to buy, sell or hedge a position. This study also helps in making intelligent assessments for future investments; whether to set a position open at a future price or to initiate a trade at the present level, technical analysis helps in recognizing persistent patterns in the forex market. However, a trader should always take into account the risk involved. Following recurring trends in the market do not always guarantee profitable trades as these patterns might not always be exact.

Trader’s kit

Better analysis and predictions about the forex market can be obtained by utilizing different technical indicators and charts. These indicators help interpreting fundamental factors behind rate fluctuations. Technical indicators can help determine the behaviour of the market crowd by taking into account the explosiveness, volume and other aspects of the market. Trends can also be differentiated by various patterns, trend lines, setbacks and support and resistance levels. Although not all patterns are evident, when any one pattern is accurately predicted, a trader can make a decision to wait and watch if the readings were accurate or to start trading immediately.

Although this brings our introduction to an end this still is not the end of your educational process. Online Forex Course is the next step if you want to know more about forex trading. There is a lesson on technical analysis that will help you understand more about frequent chart patterns and trend lines.

We also have technical analysis articles for detailed study of particular indicators and their usage. You may also sign in with our free practice account to experiment with your knowledge about indicators by using MetaTrader 4.

Risk Warning

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair.

More over, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin requirement, your position may be liquidated and you will be responsible for any resulting losses. To manage exposure, employ risk-reducing strategies such as 'stop-loss' or 'limit' orders.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Forex.com/UK acts as the clearing agent and counterparty to customers introduced by "Global Currencies" for an IB margined forex transactions. FOREX.com is a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the Financial Services Authority. FSA No. 190864.