Forex Market Trends
Support and resistance levels
A support level can be the previous minimum. The resistance level can be the maximum the day before or what is better known as peak. After breaking a resistance level, this often becomes support level if the price of the traded instrument falling again. When the value drops and breaks the support, this then becomes the new minimum. Similarly, if the value rises above the level of resistance, this becomes the maximum.
Setbacks are percentages. It is possible that during the meeting (with the open market), the instrument is studying or in which is invested step back to quotes from previous days. It can be up or down. The most commonly used reverse is 50%. levels corresponding to one third, 38% and 2/3 are also used.
The easiest way to start an analysis is to know and apply trendlines. The first thing to do is draw a straight line connecting two points on the graph. To draw a line upward trend, we followed two minimum and, for a descending trend line, one two consecutive peaks. You will notice that, generally, the price goes back to a trendline before continuing it. When the price breaks a trendline means that this is over. The longer a trend line and has been tested more times, more important will. Note that a trend line is validated when the price touches 3 times.
At the time of search for signs of buying and selling it is necessary to check the moving averages. These averages indicate if an existing trend is still valid. Be careful: these do not predict changes in the trend. Traders often use two moving averages. The moves above and below the average of 20 and 40 days are very popular. The averages of 5 and 20 days are highly appreciated by those operating in very short time.
To identify overbought or oversold conditions in the markets are commonly used oscillators. These let you know if the market has risen or fallen too much and expect imminent change. The relative strength index, or RSI and stochastic are most often used by a trader oscillators. These oscillators have a scale from 0 to 100. With respect to RSI: if its value is above 70 means that there is overbought. If the RSI is below 30 it means there is oversold. Regarding the stochastic, 80 indicates overbought and oversold 20.