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Forex Technical Analysis Part 2

Before entering a position, you need to know in advance when to exit the market. Traders will not hold positions indefinitely, that’s for sure. Knowing how long you want to maintain your position will determine your exit point and price. If you decide to hold a position for a week, then your profit target will naturally be greater than your goal of holding on to a few hours, because, given the longer period, you may want the price to rise further.


This is a personal decision of the trader and depends on his risk tolerance, expected lifestyle and his time devoted to analyzing the market.


There are basically four types of trading deadlines:

  1. Scalping
  2. Same-day

trading 3. Swing tradingTrading



They are explained below.

1. Scalping

This is the shortest transaction time; explore small changes in currency prices. It describes the ultra-fast action of opening and closing positions in seconds or minutes, in order to steal some points from each transaction. The profits from winning trades are small, and the number of those winning trades must be large enough for these small profits to increase.


Currency traders generally need to be able to obtain the narrowest spreads and the fastest connection speeds in order to trade at bullet speeds for a small profit. They tend to perform this operation several times a day to accumulate small profits.


Losses must be limited so that large losses do not eliminate the profits made in many winning trades. Many foreign exchange market makers are reluctant to conduct such transactions because they find it difficult to cover the other side of the transaction due to the rapid speed of their system and the large number of orders entered.


2. Trading Daily

Trading Daily trading is one of the most popular types of trading and traders can open and close positions in one day. As they do not know whether prices will change drastically during sleep, they will not maintain their positions overnight. The maintenance period for your transaction can vary from a few minutes to a few hours.


The day’s trading relies heavily on intraday momentum to bring the current price to the desired price level in one direction. Day traders are looking for signs that the probability that a currency pair will move from point X to point Y in a specific direction within a day is high, regardless of whether the price is moving in a trend or within a range .


Day traders tend to wait for good trading opportunities instead of trading as money changers usually do. This type of trading involves a high degree of concentration of traders, as positions must be monitored closely on the price charts.


3. Trading Swing Swing

Swing Swing traders hold positions for several days, but rarely for more than a week. Identifying and using trends early is the main objective of this trading method, and the profit target is often higher than the day’s trade, because swing traders expect greater opportunities for price fluctuations when holding for a few days. Unlike day traders, swing traders must face risks at night.


As the turnover transactions monitor the market much less, this type of transaction is usually the first choice for those who work during the day. My opinion is that even if swing traders do not monitor the market, they should still keep up to date on market fundamentals and technological changes.


  1. Trading Position 

The positions cover the longest period of time and refer to traders who hold positions for weeks or even months. Market traders seek to identify and trade currency pairs to show that a medium to long-term trend is taking place – but this will take more than a few days. Their positions are usually closed before the trend ends. Among all the different negotiations, this time of negotiation is the most time-saving, because there is not much need for intensive monitoring.


Many position traders define a stop loss, and if the price falls after a certain point, the stop loss will automatically close your position.


Choose the time period

Generally, the shorter the trading time, the more time is spent monitoring the market. As positions are opened and closed on the same day, day traders tend to keep in touch with price fluctuations and market events.


Whereas, at the end of the spectrum, location operators do not need to monitor the market so fiercely. In terms of risk, I would say that the longer the transaction, the greater the risk

must be borne by the trader. Simply because the market has more time to fight them, and can fight them more than in a short time.


Many of the strategies mentioned here are for short-term trading. However, you can decide the length of the retention period according to your personal preference, adjust your profit target and prevent loss accordingly. Obviously, the size of the profit target and the stop loss will be proportional to its maintenance period – the shorter the period, the smaller the profit target and the stop loss will be; the longer the trading time, the greater your profit and stop loss.


Forex demo account for technical analysis

Opening a foreign exchange demo account is a good way to conduct technical analysis. At this stage of technical analysis, there is only a small difference between having a live account and a demo account, and you can learn a lot. This is the first in a series of articles.


Small psychological difference Small psychological




The Forex demo account is very useful for analyzing technical analysis and its results. When checking exchange rates, identifying trends and viewing resistance and support lines, the process is exactly the same as using a live account. When exiting the market, if you perform a technical analysis and use a live account or a foreign exchange demo account, there will be a slight difference. When you have a real account, the psychological impact is very small: it is the fear of losing a profitable business. This function does not exist when practicing on a demo account, but the impact is small. When you have a live account with an open position, the psychological impact will be greater. But when you leave, there is little fear of failure. Therefore, having a demo foreign exchange account is an excellent simulation for the technical analysis phase.


Learn technical analysis through a foreign exchange demo account


First, it is important that your broker provides you with exactly the same tools as a live account to conduct simulated account transactions. This refers to trading tools, charts and everything else that you deem necessary. The only difference should be the username! After finding the graphical tools for the first time, it’s time to start some technical analysis. I am not going to describe all the analysis methods here, but just provide some guidelines for studying your Forex demo account in more depth and preparing for the real world.


  1. Choose one of the easiest currency pairs to trade, such as AUD / USD or EUR / GBP (see the list of the most predictable currency pairs).
  2. Start with trend lines on the daily chart: they are usually easy to spot and provide a comfortable starting point.
  3. Upward and downward trends: also from the fundamentals of the analysis.
  4. Check the oscillator: first select the most popular oscillator and then check the oscillator that best suits you.
  5. Do an analysis: after drawing a few lines, look for opportunities and write them down.
  6. Observe market performance after analysis.
  7. Record the results.


It is very good to use your foreign exchange demo account for technical analysis. To make the most of it, it is important to write down the analysis, record and keep the record. Yes, I said the same thing in three different ways, let me repeat:


Analysis of records is essential!


If you don’t record your own movements, it will be difficult to learn to analyze them, and your foreign currency demo account will just waste time. Let me summarize: learning how to perform a successful analysis is the best thing that a Forex demo account can provide you. At this stage, the psychological difference between the demo account and the real account is very small. When practicing on a foreign exchange demo account, it is important to record your movements. This is essential for learning.

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Mick is Editor in Chief and writer here on 361forex. I have been involved with the financial market for over 10 years as a self-taught professional trader and financial manager. Other features he loves to ride his bike on weekends, loves movies and going out with friends.


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