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Traders can develop their own strategies being the most suitable for them. Some market participants use only technical analysis, others prefer to go by fundamental factors. There are those who combine both types of analysis determining entry and exit points. There is a whole myriad of analytical tools helping traders understand all fluctuations and make complete market analysis. To become skillful and understand the tools, beginner traders are recommended to examine every analytical tool. Support and resistance levels are considered to be the basis of most trading strategies.
Traders use these levels to determine a moment to enter or exit the market. Support is the lowest level touching which a price is likely to switch to an upward movement. The resistance level indicates the highest price at which traders prefer to close positions to avoid the risk of a significant decline. At support and resistance levels, trends are tested and confirmed. Breaches of these levels point to a stable price movement. Support and resistance levels can be determined through analysis of price charts of previous unbroken support and resistance levels for any period of time. The moving average is another instrument of trading strategy development.
The simple moving average shows a price within a certain period of time. This tool is used to eliminate the short-term price fluctuations. It allows traders to see the overall market situation. Also, the moving average is used to indicate future price movements, whether ascendant or descendant. If price is above the moving average, the market is bullish and it’s time to buy an asset. The market is bearish if price is below the moving average; it’s time for selling. Traders can make a deep analysis of the forex market using several trading tools. When indicators signal the beginning of a market movement, it is the time to start trading relying on one indicator.
The main principles of the fundamental analysis are the same. Developing a trading strategy, traders should remember that any strategy includes clear principles and rules of entering and exiting the market as well as a good analysis of the market movement in the nearest future.