Technical Analysis



What is Technical Forex Analysis?
Trend Line at Forex Market
“Pivot Point” Calculation
Understanding "Support" and "Resistance"
What is Forex indicator? 
How to download indicator at Metatrader?

The Technical Forex analysis is concerned with what has actually happened in the forex market, rather than what should happen. A Technical Forex Analyst will study the price and volume movements and from that data create charts to use as his primary tool. The Technical Forex Analyst is not much concerned with any of the “bigger picture” factors affecting the forex market, as is the fundamental forex analyst, but concentrates on the activity of that instrument’s market. Technical Forex Analysis is based on three underlying principles:

Forex Market action discounts everything
This means that the actual Forex rates is a reflection of everything that is known to the Forex market that could affect it, for example, supply and demand, political factors and market sentiment. The pure Forex Technical analyst is only concerned with Forex rates movements, not with the reasons for any changes.

Forex Rates move in trends
Technical Forex analysis is used to identify patterns of forex market behavior which have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. Also there are recognized patterns which repeat themselves on a consistent basis.

History repeats itself
Chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little with time.

List of categories of the technical Forex Analysis theory:

Indicators (Oscillators, eg: Relative Strength Index RSI)
Number theory (Fibonacci numbers, Gann numbers)
Waves (Elliott wave theory)
Gaps (High-Low, Open-Closing)
Trends (Following Moving Average)
Chart formations (Triangles, Head & Shoulders, Channels)

Technical Forex Traders use Forex trading information (such as previous prices and trading volume) along with mathematical indicators to make their Forex Trading decisions. This information is usually displayed on a graphical chart and is updated in real time throughout the trading day. Technical Forex traders believe that all of the information about a Forex market is already included in the price movement, so they do not need any other fundamental information (such as earnings reports). There are many different types of charts and many different mathematical indicators. Some indicators are better suited to short term Forex trading, and others are better suited for longer term trend following Forex trading. Individual Forex traders are usually technical Forex Traders. Technical Analysis appears to have been used at least 200 years ago in Japan. Modern Technical Forex Analysis is usually performed by the Forex trader interpreting their charts, but can just as easily be automated because it is mathematical. Some Forex traders prefer automatic analysis because it removes the emotional component from their Forex trading, and allows them to take trades based purely on the Forex trading signals.


Technical analysis is built on the assumption that prices trend line. For both trend identification and confirmation, trend Lines are an important tool in technical analysis. A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Many of the principles applicable to support and resistance levels can be applied to trend lines as well.

Trend Line is 3 kinds.
1. Uptrend
2. Downtrend
3. Sidewaytrend
Uptrend Line
An uptrend line has a positive slope and is formed by connecting two or more low points. The second low must be higher than the first for the line to have a positive slope. Uptrend lines act as support and indicate that net-demand (demand less supply) is increasing even as the price rises. A rising price combined with increasing demand is very bullish, and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the uptrend is considered solid and intact. A break below the uptrend line indicates that net-demand has weakened and a change in trend could be imminent. During uptrend, you can buy currency.




Downtrend Line
A downtrend line has a negative slope and is formed by connecting two or more high points. The second high must be lower than the first for the line to have a negative slope. Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is increasing even as the price declines. A declining price combined with increasing supply is very bearish, and shows the strong resolve of the sellers. As long as prices remain below the downtrend line, the downtrend is solid and intact. A break above the downtrend line indicates that net-supply is decreasing and that a change of trend could be imminent. During dow ntrend,  you can buy sell currency.




Sideway Trend
Sideway trend is a trend where price does not move like uptrend or downtrend. During sideway trend, one should not sell or buy currency.


The “pivot points” are considered to be the major levels of “support and resistance” where you are likely to see repulsion of price. They are very useful tools that use the previous bars' highs, lows and closings to project “support and resistanc”e levels for future bars. . “Pivot Point” Calculation informs you how to:
• Predict price ranges in a given time period.
• Use the pivot point as a moving average.
• Build a trading system based on the pivot point. 


How “Pivot Point” consists of:
Resistance 3 (R3)
Resistance 2 (R2)
Resistance 1 (R1)
Pivot Point (PP)
Support 1 (S1)
Support 2 (S2)
Support 3 (S3)


How to trade using “Pivot Point”?
The “pivot points” can serve as a good entry and exit indicator. There are different ways you can trade with “pivot point” depending on the type of traders you are.
Do not worry about the calculation and the formula as there are numerous pivot calculators out there that you can use to help you calculate all the levels.
In this post today, I will go through the step on how you can set up “pivot points” on your chart.
R3 = High + 2 x (PP – Low) 

R2 = PP + (High – Low) = PP + (R1 – S1) 

R1 = (PP x 2) – Low 

PP = (High + Low + Close) / 3 
S1 = (PP x 2) – High 
S2 = PP – (High – Low) = PP – (R1 – S1) 
S3 = Low – 2 x (High – PP)

Step 1: Go to your Hourly Chart (Each candle represent an hour)


 Step 2: Select a time that you are trading and then back date 24 hours (Example: if you are trading at 30th April 2012 7am , you will also need the data on the 1st May 2012 6am.

Hourly Chart Setup
 Step 3: Place your cursor on the  30th April 2012 7am candle and record down the OPEN (O) value

 Step 4: Look for the highest candle within the  30th April 2012 7am  to   1st May 2012 6am   and then place your cursor on the candle to record the highest (H) value

 Step 5: Look for the lowest candle within the same period as step 4 and then place your cursor on the candle to record the lowest (L) value.

 Step 6: Place your cursor on the  1st May 2012 6am  candle to record the CLOSE (C) which is the closed value for the day.


Step 7: Go to your “pivot point” calculator and then enter the OHLC value to calculate the pivot levels. To download “pivot point” calculator http://www.traderknowledge.com/trading/pivot-point-calculator-free-download/






At forex market, the concepts of “support” and “resistance” are undoubtedly two of the most highly discussed attributes of technical analysis. “Support” and “resistance” are often regarded as a subject that is complex by those who are just learning to trade. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. If you clearly understand  about “support” and “resistance”, you will be able to take proper decision what to do whether buy or sell. You will know how forex market works if you understand “support” and “resistance”. 
In the above diagram,  the zigzag pattern is making its way up (bull market). When the market moves up and then pulls back, the highest point reached before it pulled back is now “resistance” and it’s called “resistance level” (Number 1, 3,5).
When the market moves down and then pulls back, the highest point reached before it pulled back is now “support” and it’s called “support level” (Number 2,4).

 What is “Support”?
At forex market, “support” is the price level at which demand is thought to be strong enough to prevent the price from declining further. When the price declines towards “support” and gets cheaper; buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the “support” level, it is believed that demand will overcome supply and prevent the price from falling below support. In the following screenshot, the cross line is called “support”.
“Support” does not always hold and a break below “support” signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. “Support” breaks and new lows signal that sellers have reduced their expectations and are willing to sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below “support” or below the previous low. Once support is broken, another “support” level will have to be established at a lower level.
Where “support” is  established?
“Support” levels are usually below the  "Pivot Point" , but it is not uncommon for a security to trade at or near “support”. Technical analysis is not an exact science and it is sometimes difficult to set exact “support” levels. In addition, price movements can be volatile and dip below “support” briefly. For this reason, some traders and investors establish “support” zones. 

What is “Resistance”?
“Resistance” is the price level at which selling is thought to be strong enough to prevent the price from rising further. When the price advances towards “resistance”, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the “resistance” level, it is believed that supply will overcome demand and prevent the price from rising above “resistance”. 


Where "Resistance" is established?

“Resistance” levels are usually upper the "Pivot Point".

What is Forex indicator? 

At Forex Market, Forex indicators are used to forecast the upward and downward movements of different currencies. Forex indicators are also known as forex technical indicators. The primary function of forex indicators is to maximize the profit and minimize the losses. Forex indicators are very useful and famous in the filed of trading markets. Almost all the investors whether individuals, business entities or huge organizations use forex indicators for risk free and profitable investments. 
Indicators are used for identifying, or even creating patterns from the chaos of the currency market. In all cases, they receive the raw market data as the basic input, and manipulate it in differing ways to create actionable trading scenarios. The natural consequence of this description is that indicators are not tools of prediction.  Instead, they are used to give order to the price data, so that it is possible to identify possible opportunities which can be exploited profitably by the trader. No indicator is right or wrong with respect to the signals that it emits, but each of them must be used with an appropriate money management strategy in order to deliver the desired results.
There are many different kinds of indicators, and it is not at all a hard task to define one's own tools for the purpose of evaluating the market provided that a basic literacy in averages is attained, what is desired from the created indicator is made clear. Different constructions will lead to different techniques which can then be employed most effectively as part of a trading strategy. Many methods and techniques are used in forex.
Every technique has its own disadvantages and advantages. A forex indicator hides all the complexities of numbers, signals and calculations from the user and provides them with a short and precise indication of currencies.


On this post,  you will be able to understand how to download MT4 and MT5 Forex indicators that can be attached to the MetaTrader Forex trading platform to boost your Forex trading performance. Using forex indicators, you can develop your own Forex trading strategies or you can simply follow them as the trading signals. 
Step 1. At first you have to download/collect  your desired indicator. Generally the format of  indicators are mq4,mq5, ex4, ex5. 
Step 2. Then go to the folder where the Metatrader is installed  (My Computer>C: drive>Program files>[MetaTrader-folder]>experts>indicators). In this folder, paste your desired  indicator.



Step 3.  Run Metatrader4
Your new indicator will be available from the top menu: "Insert -> Indicators -> Custom" or from the Navigator window on your right sidebar, again under Custom Indicators.

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