A few decades ago, trading seemed like a niche activity that only a handful of people could understand and participate in. Most people had to trade through brokers and other similar companies. The advent of the internet, improved security measures, and new startups in the space mean that people can now access trading from the comfort of their homes. Discover why successful forex traders trust technical analysis to inform their decisions and how to make the most of available MT4 technical analysis tools.
More Tools than You Can Imagine
MetaTrader 4 is one of the world’s most popular trading platforms for forex traders due to its feature-rich environment, ease of use, and automated trading ability. The team behind the product understands that there can never be a shortage of analysis options on a platform like this. Famous analysis options like Bollinger Bands, Stochastic Oscillator, and Parabolic SAR are available, but these tools are only some of the numerous options at your disposal.
Forex trading is a science to some and an art to others. Regardless of your trading philosophy, you’ll find a tool that perfectly serves your needs. Are you a trader who thrives on having more options? Then you’re in luck because the technical analysis options available to you as a forex trader are incredible and constantly being improved.
Niche Tools and Interoperability
Every successful forex trader must be able to create a reliable technical analysis strategy. That said, it’s borderline impossible and impractical to use every analysis tool offered by trading platforms. The tools and mechanisms work in different ways and consider multiple data points, which is why two tools used on the same asset can provide different trading suggestions. At the same time, having an interconnected global forex trading ecosystem helps ensure that there’s something for everybody. Investors in different countries and industries approach analysis differently, and having access to online platforms is a great way to transact and interchange information and data with others, a concept popularly called interoperability. Traders can easily move across trading platforms while accessing the best analysis tools and transacting across regions.
Community Support
When trading became a fairly accessible global activity, the need for easy and reliable ways to educate new traders became a priority. Today, as a new trader, you can easily find resources and guidance in various formats, including text, video, audio, and multimedia, on leading trading platforms like MT4. Technical analysis support begins when all forex traders are educated on how to use the different tools at their disposal.
Type of Analysis
Multiple forms of technical analysis exist while trading forex, but most can be divided into bottom-up or top-down.
Bottom-Up
While using a tool featuring a bottom-up approach, traders can expect to focus on the performance of individual stocks rather than a broad macroeconomic view. Bottom-up analysis aims to pique traders’ interest. A good example is an investor discovering an underpriced or undervalued currency pair that showcases signs of a downward trend. The trader can then identify a favorable entry point as well as potential exit points. The odds are that you’ve likely carried out a bottom-up analysis before.
Top-Down
This form of analysis is interested in the broader economy and how macroeconomic activities affect individual industries and securities. An example is a trader who studies the U.S. energy industry and finds out that potential supply disruptions from American-Canadian tariffs can exert extra pressure on the industry and lead to price increases for consumers. The trader can then bet against the U.S. Dollar or Canadian Dollar based on their analysis. The top-down analysis also works while trading individual stocks because what happens in an industry often impacts companies operating within it.
A Bit of Everything
The good news is you do not need to choose between one or the other; many seasoned traders combine bottom-up and top-down analysis tools to make informed decisions and gain an edge in the market. If you know where to look, you’ll find that most trading apps make it easy to combine multiple forms of technical analysis. Technical and fundamental analysis are two sides of a coin–they inform each other. Over time, traders figure out the combination of analysis that works for them. In the meantime, new forex traders should not be scared of trying new tools.
What’s Next?
There’s no better time to be a new forex trader than now. Newbies can access a global “library” of knowledge from institutions, individuals, regulatory bodies, and more. All you need to do is be willing to learn and try new things. There are multiple paths to profitability as a forex trader; it’s time to discover yours.
