This article continues our forex education in technical analysis, looking at charts and indicators. Here we will focus on the indicator known as the Parabolic SAR (Stop And Reversal), developed by Welles Wilder.
Most indicators involve identifying a trend in price movements, which of course is a very important skill to have. The trend is your friend as they say, and traders need to be able to place orders as accurately as possible at the start of a new trend. But at the same time it is important to know when a trend is ending, so that you can close your trade. If you do not do this, you could easily see the market wiping out all of your profits and turning a winning trade into a loser.
There are only two basic methods for forex market trading analysis. When you are starting out, you need to understand them both in order to decide which method is the best for you and how to apply it to your trading system or strategies.
The two methods are known as fundamental analysis and technical analysis. Let's look at fundamental analysis first.
Fundamental Analysis For Forex Market Trading
The MACD indicator is one of the most useful tools of FX technical analysis but it is not usually well understood. This is a pity because many traders could probably use it more effectively if they understood it better.
The letters of its name stand for Moving Average Convergence Divergence. It is true that the name sounds rather complicated and unfortunately this is often enough to put people off from wanting to know more. So they only use the very simplest applications without understanding the power of the tool itself.
