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The foreign exchange market is characterized as carrying a significant degree of risk. There are several types of forex risks that participants should examine when considering the option of trading there.
Bar charts and candlestick charts depict gaps that may occur between currency close and open prices. Technical analysis refers to these gaps as interruptions.
One of the tools forex technical traders use in order to determine their trend trading strategies, is the Directional Movement Index (DMI).
The Relative Strength Index (RSI) is a technical momentum indicator used to measure the relative changes between the lowest and the highest close prices of a currency.
Momentum measures the rate at which a currency price changes. In terms of trending, it is a very useful technical indicator of the strength of a currency price.
Stochastic oscillators are technical momentum indicators that compare the closing price of a currency to its price range over a certain period of time.
In this article we will examine the basics of another major group of forex technical analysis indicators - the oscillators.
In this article we will examine some of the mathematical tools based on moving average applied in technical analysis.
The term technical indicators refers to the mathematical tools that are applied when using technical analysis. Generally, there are two basic groups of technical indicators: moving averages and oscillators.
The rectangle trend continuation pattern resembles a rectangle (as its name implies) formed by two parallel to each other resistance and support lines.
The wedge continuation pattern combines some of the characteristics of the triangle and the pennant formation.
The triangle continuation patterns resemble pennants without poles. Forex technical analysis distinguishes four types of triangles: symmetrical, ascending, descending, and expanding.
The pennant continuation pattern is similar to the flag chart formation but the support and resistance lines converge, which makes it to appear as a pennant.
Forex traders who use technical analysis should be familiar with the chart patterns that confirm the existing trends. The most common continuation patterns are flags, triangles and wedges.
It is worth remembering that the major trend reversal patterns are the (inverted) head-and-shoulders, the double top (bottom) and the triple top (bottom) patterns. This article considers the triple top and the triple bottom formations.
The double top and the double bottom formations represent another well-known pair of trend reversal patterns that are commonly found on forex charts.
There are different reversal patterns that can be used in forex technical analysis. This article considers the Head-And-Shoulders and the Inverted Head-And-Shoulders trend reversal patterns.
The Dow Theory serves as the basis for the fundamental principles that guide the technical analysis.
If you are interested in comparing the current price of a currency on the forex to that of a given time period in the past, you should apply the stochastic oscillator.
It is important for forex traders to closely examine the potential reversals at particular points in the charts available.