Technical analysis of foreign exchange investment: master chart shapes and interpret market signals

1. Understand chart shapes

Chart patterns reflect the behavior and psychology of market participants and are signals of trend reversal. The head and shoulders pattern is a classic reversal signal, which indicates that the market is about to reverse after a long-term upward trend. The double top pattern indicates that after a rise, the market encounters resistance and is unable to continue rising, forming two highs. Investors should understand the characteristics and significance of these chart patterns and accurately identify them in trading.

2. Identify trend lines

Trend lines are important support and resistance lines on charts. An uptrend line is a straight line connecting a series of lows, while a downtrend line is a straight line connecting a series of highs. When the exchange rate moves along the trend line, investors can use it as a reference for buying and selling. Buying near the rising trend line and selling near the falling trend line will help capture the market swing.

3. Use Moving Averages

The moving average is an important indicator that reflects the average cost of the market. The short-term moving average (such as the 5-day or 10-day line) reflects short-term market costs, and the long-term moving average (such as the 20-day or 60-day line) reflects the long-term market cost. When the short-term moving average crosses above the long-term moving average, it is usually a buy signal; when the short-term moving average crosses below the long-term moving average, it is usually a sell signal.

4. Pay attention to the Relative Strength Index (RSI)

The Relative Strength Index is a technical indicator that reflects market strength by calculating overbought and oversold indicators. The value of RSI ranges from 0 to 100. When RSI exceeds 70, it indicates that the market is overbought and there is a risk of adjustment; when it is below 30, it indicates that the market is oversold and a rebound may be imminent. Investors should combine other technical indicators and fundamental analysis to comprehensively judge market conditions.

5. Use Bollinger Bands

Bollinger Bands are fluctuation bands composed of upper and lower tracks, which can reflect market volatility and support and resistance levels. The upper track is multiples of the standard deviation plus the average line, and the lower track is multiples minus the standard deviation plus the average line. When the exchange rate hits the upper track, it may be an opportunity to sell; when it hits the lower track, it may be an opportunity to buy. At the same time, the opening size of Bollinger Bands can also reflect the strength of market volatility. Bollinger Bands can also be used in conjunction with other technical indicators such as chart patterns and trend lines to improve investment accuracy.

In short, technical analysis of foreign exchange investment requires investors to continue to learn and practice. By understanding chart patterns, identifying trend lines, using moving averages, paying attention to the relative strength index, and using techniques such as Bollinger Bands, investors can improve investment accuracy in the foreign exchange market. However, please note that investment involves risks. Please ensure that you fully understand and accept the relevant risks before making foreign exchange investments.