Forex Technical Analysis

Forex Technical AnalysisForex investing can be extremely profitable, but requires research before any investment decision. Forex stands for Foreign Exchange, an international network of banking groups. Forex allows investors to trade currency based on exchange rates, often using leveraged trades.

Many Forex investors use technical analysis when researching a currency pair. Technical analysis uses mathematics and algorithms to predict a future exchange rate based on historical data. While fundamental analysis uses current events to make investment decisions, technical analysis predicts a currency exchange rate based on its history over time.

Many Forex tools used in technical analysis can be very powerful. For beginners to Forex trading, Fibonacci ratios can be a great way to learn about technical analysis.

Fibonacci Numbers and Forex

Fibonacci numbers follow this pattern: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144. Each of the previous two numbers in the pattern are added up to the sum of the third number. The first two numbers, 0 and 1, add up to 1. The second and third numbers, 1 and 1, add up to 2. The third and fourth, 1 and 2, add up to 3. This pattern continues indefinitely.

When Fibonacci numbers reach high values, a ratio emerges. Each number is 62% larger than the previous number. This ratio of 62% can be found in many places in nature, such as the expanding pattern of sea shells. In addition, the 62% can be found in many stock markets and Forex currencies. These ratios are often seen in retracement levels for a price.

Forex Technical Analysis

When a currency rises in price, it will often retreat after peaking. It will often retreat 38%, which is 100-61. By subtracting the Golden Ratio of 62% from 100, it’s possible to find a common retracement number seen in many currency charts.

When looking for retracement levels, it’s important to pair them against a set amount of time. Since a currency rarely drops 38% in value over a short time period, it’s necessary to find retracements set against a short bull run of an exchange rate. For example, if the EUR / USD exchange rate rose from 1.5 EUR/USD to 2 EUR/USD, the 38% retracement of the price increase would be approximately 20 cents. If the price drops from 2 EUR/USD to 1.8 EUR/USD, it will have retraced approximately 38% of its 50 cent price increase.

When a currency meets a retracement level, it may reverse in direction. An exchange rate that has been declining will often reverse at a retracement level, giving investors the opportunity to profit.

Learn Forex Technical Analysis from the Professionals

LucrorFX offers a wide variety of tools for forex traders. Lucror FX offer excellent technical analysis tools for beginners, and many advanced tools for professional traders. Lucror FX offer tools to help investors retrace Fibbonaci ratios, calculate moving averages, mark price support and resistance levels, and more. It’s possible to learn an incredible amount about a currency exchange rate based on historical information. By leveraging the powerful tools at Lucror FX, it’s possible to take one’s investing to the next level. Sign up for a Free Trial Account today!

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