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Another effective forex trading strategies commonly used by experienced traders is technical analysis. It refers to an attempt to foresee price movements and changes by looking into previous market data. In fact, traders usually adopt technical analysis in order to get the full picture of price history for particular currency. At times, traders will ensure that the currencies bought are sold at fair rates by checking the chart via technical observation.

Technical analysis are made based on several common assumptions – combination of market forces such as political stability, economic health, interest rates as well as supply and demand will influence price changes within the market. Even though most traders realized that currency changes cannot be control by any particular wealthy individual or financial firm, the prices tend to follow trends.

Hence, forex trading strategies can depend on previous history to foresee the upcoming price changes. Traders can gather forex data from as long as 100 years ago. Over the years, patterns and trends have emerged. The basis of the trends is based on people’s reaction towards circumstances as well as human psychology on these events. Technical analysis and fundamental studies are inter-related. Traders may use fundamental analysis to support the findings acquired from technical analysis.

An advantage for using technical analysis – it can be used widely in different markets and various currencies at one particular time but unlike fundamental studies, it requires traders to keep track of political and economic health of a country. Therefore, it is almost impossible for one to observe these conditions (political and economic) in more than several countries.

As mentioned earlier, there are several technical indicator types including trend, strength, cycle, support, momentum and volatility. Other than learning these types of indicators, one need to understand about moving averages as well.

Moving averages assist traders to identify and predict upcoming trends. You need to familiarize with few terms – simple moving average, weighted moving average and exponential moving average.

Simple moving average measures price point during particular period regularly. Traders calculate the high, low and close price points to create a line while weighted moving average emphasizes on the current data. Lastly, exponential moving average is similar to weighted moving average as it focuses on current data but in a different way. For exponential moving average, the outcome is based on multiplication of the recent price by previous term’s average price.