How to Forex Technical Analysis for Beginners to Make a Profit

Technical Analysis Forex for Beginners. Have you ever experienced difficulties or lacked confidence when doing forex technical analysis?

Relax, you are not alone because some traders often say that “technical analysis is too hard to use”. This technical analysis has more tools when compared to fundamental analysis.

Novice traders in particular are often confused about the steps to perform technical analysis because they do not understand the basic concepts, and most novice traders tend to be “fascinated” by trading strategies that are often deemed “complicated”.

In fact, forex technical analysis is not as complicated as it is often expressed.

Do not believe? Take a look at the image below.

Technical Analysis Forex for Beginners

In your opinion, where is the direction of the price movement shown in the image below? Is it up or down?

If you answered that the price action in the image above is down, then your answer is very correct.

What you are doing now is a basic application of technical analysis in forex trading, where you can identify the direction of the trend very well. This way, you already have a strong enough foundation to be able to do this analysis.

What should be mastered in technical analysis?

Besides understanding price direction, you also need to understand 3 other important things in technical analysis. Here are some of them:

1. Understand the basic concepts of technical analysis

Technical analysis in forex trading is an analytical method used to predict the direction of future price movements by studying the price data in the previous period that was formed and displayed on the chart.

In this context, traders should at least understand the charts that are often used in technical analysis first so that they know the price movements well.

2. Understand the concept of a trend line

The trend line is one of the simplest tools that is important to know because it can help traders, especially beginners, to recognize potential profits in forex trading just by drawing a line.

Using the trend line, you can identify support and resistance levels and combining it with indicators can be a powerful strategy to look for buying/selling opportunities.

3. Understand support and resistance

The concept of support and resistance is very important for traders to know. Basically, they are both able to identify locations where the price is likely to see a significant move.

After you have studied and understood the three important things related to technical analysis above, it is now time to do a forex market price analysis. Here are five simple steps to doing technical analysis properly and correctly.

How does technical analysis work in forex trading

1. Continuing trend recognition

See and learn about the current trend. Starting with the long-term trend, then stepping back to the medium-term or short-term trend.

Although you are free to choose which direction to take advantage of, it is advisable to look for long-term trends (major trends) and follow them.

If you already know the trend, the best trading strategy you need is to take a position (trading) in the direction of the ongoing trend.

If the trend at that time is up (uptrend), you should follow the buying opportunities. Conversely, if the current trend is down (downtrend), look for selling opportunities.

2. Determine support and resistance levels

In forex trading, this strategy is a boundary connecting the highest and lowest point in price where you can look for opportunities to buy in the support area or sell in the resistance area.

If at the first step you take a position in the direction of the trend and see the current trend as an uptrend, then look for a long position in the support area and vice versa.

3. Open a position after signal confirmation

After knowing the trend and the support/resistance levels which are the entry areas, all that remains is to wait for the confirmation signal as a signal to enter the market.

In this case, you can use candlestick/chart patterns or use oscillators like stochastic.

This type of indicator can give an idea of ​​whether the market is in a state where the price is considered high enough at that time and is often followed by a drop in price (overbought) or when the price is considered low enough at that time, often followed by a rise in price (oversold).

When the oscillator shows overbought signs, you need to wait for the confirmation of the sell signal and vice versa.

The most common thing to note is: overbought or oversold conditions are not always followed by a reversal in the direction of price action. There are times when the indicator remains overbought or oversold for some time, but the price continues to move to continue its previous trend.

Therefore, it is important for you to adjust the signals given by this indicator for the ongoing trend. In an uptrend, all you have to do is look for a buy signal. Conversely, in a downtrend, you just need to look for a sell signal.

And remember, don’t use too many pointers!

why? This is because using too many indicators will make technical analysis more complicated.

4. Setting stop loss and profit targets

When setting your stop loss and profit targets, you must not forget the risk reward ratio rule where the risk of loss cannot be greater than the target profit.

To be sure, you should specify the volume of transactions you make. If you suffer a loss, the risk received does not exceed the risk tolerance you accept.

5. Wait patiently for the position to hit the Take Profit or Stop Loss

The last thing you need to do is wait patiently for the position to be hit by the Take Profit (TP) or Stop Loss (SL). Do not rush or rush to close a position due to a loss or profit because you have planned everything before entering the market.

Even if you hit a stop loss, it doesn’t mean you can’t be profitable. Profits and losses in trading are common.

As long as your trade backlog is still profitable, that means your trade was successful. You just have to be patient and consistent in repeating the above five things.

  • Things to avoid in technical analysis
  • Never break the rules of the strategy that have been set.
  • Do not rush to make a transaction if no signal is confirmed
  • Never use a trading strategy that you have not mastered/understood
  • Avoid using very complex trading strategies
  • Don’t change strategy too often
  • Do not forget to limit the risk when trading, for example with a stop loss

Very simple, right? If you have this, do you still think technical analysis is difficult?

You only need to learn the basic concepts of technical analysis well and use strategies that are easy for you to understand!