If you are looking for some lessons on Forex Trading analysis, then you should continue reading this article. In this article, I will discuss 3 common analytical skill that I use during day trading. They are Fibonacci retracement level, MACD (moving average convergence divergence) and stochastics chart. After reading this article, you should be able to apply the 3 common Forex trading analytical skills and reduce your risk in Forex day trading.
Firstly, I love to use Fibonacci retracement level to find out when should I place my entry. Fibonacci retracement level indicates the possible support and resistance level during a period of time. It is very easy to use the Fibonacci retracement level, you will just need to find out the high and low price, and you will be able to find the level. The Fibonacci retracement level is very important since most of the Forex traders are using it as a guide line to place entry, therefore, you will not get wrong to place your entry at these levels.
Secondly, I usually look at the MACD to find out possible reversal. By combining MACD and Fibonacci retracement level, the probability of placing entry at the wrong support or resistance level will be lower. The easiest way to find possible reversal is through MACD crossover. This happens when the fast line in the MACD crosses over the slow line in MACD.
Lastly, stochastics chart is also very important in my Forex trading analysis bible. Stochastics chart can indicate whether the current market is overbought or oversale. Just a thumb of rule, when the stochastic line is above 70, then the market is overbought, you should combine this with MACD as well as Fibonacci retracement level to find out whether there will be a reversal in the next resistance level. Vice versa, when the stochastic line is below 30, then the market is oversale.
In conclusion, while it is possible to use only one of the method above to help you in Forex day trading. However, it will be wise to always use more than one indicators to aid you in Forex trading analysis because all indicators are not perfect and they need to be double-checked using other indicators.
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