Market Direction Predictions
Can market direction be predicted?
Forex market is never Constance it changes so quickly in a cyclical manner commonly called candlesticks waves, It means that usually there are such situations on Forex when the price behavior becomes as predictable as possible. If the market direction can be predicted it means people can make money ,earn a living and enjoy profits with trading. This can be done by the use of market indicators, following price patterns and some bit of technical analysis.
Make use of Indicators
These days indicators are now automated and pre installed in trading platforms like cTrader and Mt5 these tools determines necessary parameters such as market condition, the direction and strength of the trend, and even alerts you to the upcoming reversal. Indicators can be considered as the primary tools for technical analysis. The most effective are: Moving Average, Bollinger Bands, Stochastic Oscillator, MACD histogram, RSI. This is how Stochastic Oscillator works. It is located below the graph and consists of two curved lines: the %K line (solid one) and the %D line (dashed one), which move up and down within the vertical scale from 0 to 100%. From levels 20 and 80 there are two horizontal levels, below and above which oversold and overbought zones, respectively, are located. The main signal to enter the market is the intersection of the %K and %D lines. So, if the solid line crosses the dashed one from the bottom up, then you need to open a buy order, if from top to bottom – a sell order.
Relative strength index Buy setup
The RSI is a technical analysis momentum indicator which displays a number from zero to 100. Any level below 30 is oversold, while an RSI of over 70 suggests the shares are overbought. Thus, if IBM has an RSI of 25, you can assume that the shares are very likely to rise from current levels. These indicators are good but it doesn’t mean they are 100% accuracy sometimes they delay to indicate but over ally you will get an appreciation of where the market is heading.
Market candlestick pattern
Patterns can play a crucial role as well in determining where the direction of the market is going, these patterns are a result of human psychology formed after many years of trading patterns and they are never going to change that much, so with patterns you will never go wrong. When a particular pattern forms there are rules pertaining to that pattern on weather to place a buy or sell, there are continuation patterns and reversal patterns, these are some of the basic patterns you will regularly encounter Head and Shoulders, Double Top, Wedge, Triple Bottom, Triple Top, Double Bottom, Flag, Rounding Bottom, Pennant. For each of them, there are rules for entering the market for instance lets look at a wedge and its significance to the direction of the market.
Linear tools strategy
Linear technical analysis tools is the oldest strategy of determining direction and usually represented by a set of lines: vertical, horizontal and trend. Vertical lines serve as a good guide to the beginning of a new trading session and mark the release of critical news reports. Horizontal lines allow you to draw the trend price channel (support and resistance lines). Breaking these levels is usually a sign of a trend change in the Forex market. Trend lines allow assessing the current trend, lets look at an example when trend line is broken and there is immediate change of trend.