Trading Forex: Charting Your Way by Imran Mukati
A Technical Roadmap
Much forex trading by speculators is based on technical analysis. In this third part of an article series on trading forex, we’ll look at what technical tools you should focus on.
Earlier in this series, I mentioned that forex trading is in many ways simpler than equity trading, since there are far fewer currency pairs than there are stocks. It is also important to understand that currency prices move differently. While a stock can climb or fall within a huge range — to pick an infamous example, Enron peaked at $90.56 per share in August 2000 and fell to $0.26 by November 30, 2001 just before its bankruptcy filing — currencies, by comparison, tend to move within a relatively narrow band or channel. This is because each currency represents buying power in its home country, which will only vary so much within the global economy, and because central banks intervene to affect valuation in the event their currency becomes too strong or too weak.