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Technical Analysis in Forex Trading | The Definitive Investment Guide for 2025
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Summary：Is technical analysis reliable in the forex market? This article comprehensively analyzes classic methods such as candlestick patterns, trend indicators, momentum tools, and volume signals. Drawing on real market examples from 2025, it provides investors with a systematic and practical technical analysis framework to aid risk management and trading decision-making.
1. The role of technical analysis in the foreign exchange market
Definition : Technical analysis is a method of predicting future trends based on historical data such as price, volume, and trends.
Status : In the foreign exchange market (global daily trading volume exceeds US$7.5 trillion ), about 70% of active traders rely on technical analysis to make decisions.
Application scenarios : short-term trading, intraday swing trading, trend following and risk management.
2. Classification of core technical indicators
| Classification | Representative indicators/tools | Application Scenario |
|---|---|---|
| Trend | Moving Average (MA), MACD | Identify trend direction and reversal points |
| Momentum | RSI, Stochastics | Determine overbought and oversold and capture rebound opportunities |
| Volatility | Bollinger Bands, ATR | Measure volatility and set stop-loss and take-profit ranges |
| morphology | K-line combination, head and shoulders top, double bottom | Identify changes in market forces |
| Trading volume | OBV, VWAP | Confirm whether the price trend is supported by trading volume |
III. Market Empirical Cases in 2025
USD/JPY : In April 2025, it rose sharply from 138 to 152, and the MACD golden cross gave a trend signal in advance.
Euro/USD : In May 2025, the RSI fell below 30, forming an oversold zone, and then rebounded by 3.5% within 2 weeks.
Gold (XAU/USD) : Bollinger Bands contracted → expanded, triggering a breakout from $2,200 to $2,380.
IV. Practical Risk Control Recommendations
Multi-indicator resonance : avoid single indicator and combine trend + momentum + trading volume.
Time frame linkage : daily line determines the trend, hourly line captures the entry point.
Setting a stop-loss : ATR can be used for dynamic stop-loss setting.
Avoid overfitting : Too many indicators can lead to "signal noise".
Combine fundamentals : such as central bank policies and macroeconomic data to avoid "technical traps".
V. Outlook for Future Trends
AI technology assistance : Machine learning predicts foreign exchange fluctuations.
Popularization of quantitative trading : The proportion of algorithmic trading continues to rise.
Cross-market analysis : The linkage between exchange rates, bond yields and stock indices has strengthened.
🔹 Overall Conclusion
Technical analysis is the most common investment method in forex trading, but it must be combined with risk management and fundamental analysis. Only by combining "technical analysis + capital management + compliant trading" can investors truly improve their trading success rate and reduce long-term risk.
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