Forex Technical Analysis: Part 3

Price Pattern Indicator

It is possible to break down the available data in the trending and ranging market into smaller chunks of data to prepare the next step for opening or closing the position. Creation of tension of market forces is a natural corollary during market consolidations, but as this tension breaks in either direction, a trend in that direction begins.

Price patterns are of many types. However, when a trend develops, all kinds triangle patterns emerge. But in a range bound market, the prices generally fail to breach the resistances and support levels. It is feasible to make out various short term price patterns within a major trend. The progression of trending legs break those in-between range patterns, and the trend finally sustains.

Price patterns can be further divided into consolidation patterns and reversal patterns. But as mentioned above, it is highly possible that when the branches of the main pattern break down, reversal pattern can take place. Consolidation patterns indicate that the strategists are revaluating the decisions they have made in the past and readjusting their positions. Reversal patterns are an indicator that the power of underlying trend is being diminished. Market developments may soon invalidate the present dynamics that are making the market move in the current trend.

Traders widely use the price pattern for their technical analysis. However, you should keep in mind that these indicators are just the possibilities.

Closing Thoughts                                                                                  

Numerous tools are available in the forex market for a technical trader. However, it is equally confusing for a beginner as well as an expert when evaluating the markets. The technical analysis draws its powers from the degree of accuracy of its predictions. But various technical indicators themselves are not precise enough independently. Therefore, only a high percentage of success trade can be generated through the use of these indicators.

In spite of what is said and done, technical indicators are the most widely used tool by the traders all over the world. These indicators are designed in such a way that the prediction done by these can surpass any predicting power. Only an ignorant can deny the value of technical analysis.

Chapter 17……Learning the Psychology Behind Forex Trading: Why is it Important?……>>>

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