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In-depth analysis of foreign exchange investment technical knowledge

2024-06-17

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In the field of foreign exchange investment, technical analysis is one of the important tools used by investors to predict the price trend of currency pairs. Technical analysis focuses on the historical data of market prices, chart patterns, and technical indicators to reveal the supply and demand relationship, trends, and potential opportunities in the market. This article will conduct an in-depth analysis of the technical knowledge of foreign exchange investment to help investors better understand and apply these technical analysis tools.

1. The basic principles of technical analysis

The basic principle of technical analysis is that market behavior contains and reflects all information. This means that market prices reflect all factors that affect market trends, including fundamental factors (such as economic data, political events, etc.) and market sentiment. Therefore, by analyzing the historical data of market prices, investors can gain insight into market trends and potential opportunities.

Technical analysis focuses on the following aspects:

Price trend: Price is a direct reflection of the supply and demand relationship in the market. By analyzing price trends, investors can understand the overall trend and volatility of the market.

Chart pattern: Chart pattern refers to a specific figure or pattern formed in the price trend chart. These figures or patterns often indicate the future trend of the market.

Technical indicators: Technical indicators are mathematical formulas or statistical methods calculated based on price data, which are used to evaluate the momentum, strength, trend, etc. of the market.

2. Main tools for technical analysis

Price chart

Price chart is a basic tool for technical analysis. Common price charts include line charts, bar charts and candlestick charts (K-line charts). These charts show the trend of market prices over time and help investors identify the rising, falling or consolidation phases of the market.

When analyzing price charts, investors need to pay attention to the following aspects:

Trend line: A trend line is a straight line formed by connecting the highs or lows in the price trend. Trend lines can help investors identify the long-term trend of the market and formulate corresponding investment strategies.

Support and resistance levels: Support levels are areas where the buyer's power is strong when the market price falls, while resistance levels are areas where the seller's power is strong when the market price rises. These positions often become turning points in the market and are of great reference significance to investors.

Chart patterns

Chart patterns refer to specific graphics or patterns formed in price charts. These graphics or patterns usually have specific market meanings and predictive values. Here are a few common chart patterns:

Head and Shoulders Top/Bottom: Head and Shoulders Top and Head and Shoulders Bottom are reversal patterns, indicating that the market is about to turn from an uptrend to a downtrend or from a downtrend to an uptrend, respectively.

Double Top/Bottom: Double Top and Double Bottom are also reversal patterns, indicating that the market may reverse after a period of rising or falling.

Triangle: Triangle patterns include ascending triangles, descending triangles, and symmetrical triangles. These patterns usually indicate that the market is forming a new trend or is preparing to break out of an existing trend.

Technical Indicators

Technical indicators are mathematical formulas or statistical methods calculated based on price data and are used to evaluate the momentum, strength, trend, etc. of the market. Here are a few commonly used technical indicators:

Moving Average (MA): Moving average is a line obtained by calculating the average of price data over a period of time. Moving averages can help investors identify market trends and support/resistance levels.

Relative Strength Index (RSI): RSI is a momentum oscillator used to evaluate overbought or oversold conditions in the market. When the RSI value exceeds 70, the market may be overbought; when the RSI value is below 30, the market may be oversold.

Stochastic indicator (KDJ): The KDJ indicator is a momentum indicator based on statistical principles, which is used to evaluate the short-term volatility of the market. By comparing the relative positions of the K line, D line and J line, investors can judge the strength and trend of the market.

3. Practical application of technical analysis

In the actual foreign exchange investment process, investors need to combine technical analysis and fundamental analysis to formulate investment strategies. The following are some practical application skills:

Trend trading: When the market forms a clear trend, investors can choose a trend trading strategy. By trading with the upward or downward trend of the market, investors can obtain higher returns. However, trend trading requires investors to have a high market sensitivity and operating skills so that they can stop losses in time when the trend reverses.

Breakthrough trading: When the market price breaks through an important support or resistance level, it often means that a new trend or reversal is about to appear in the market. Investors can quickly enter the market when the breakthrough occurs to obtain short-term gains. However, breakthrough trading requires investors to have the ability to make quick judgments and executions so that they can quickly seize market opportunities after the breakthrough occurs.

Oscillation trading: When the market is in an oscillation stage, investors can choose an oscillation trading strategy. By identifying the market's oscillation range and trading signals, investors can sell high and buy low within the oscillation range to obtain stable returns. However, oscillation trading requires investors to have high patience and discipline in order to remain calm and strictly implement trading plans within the oscillation range.

4. Notes on technical analysis

Although technical analysis has important application value in foreign exchange investment, investors also need to pay attention to the following points:

Don't rely too much on technical analysis: Technical analysis is only part of investment decision-making. Investors also need to combine fundamental analysis and other factors to comprehensively judge market trends. Over-reliance on technical analysis may cause investors to ignore

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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