Introduction to Forex Technical Analysis: K-line Patterns and Common Indicators

1. K-line pattern analysis

The candlestick chart is a core element of forex trading. Each candlestick chart represents four key price levels: opening, closing, high, and low. By combining these patterns, traders can identify market sentiment and underlying trends.

Common K-line patterns include:

• Hammer : Often appears at the bottom of a downtrend, indicating that buying power is increasing and a reversal upward may occur.

• Shooting Star : A top reversal signal, suggesting that the uptrend may be ending.

• Engulfing Pattern : A large bullish or bearish candlestick completely covers the previous candlestick, usually indicating a trend reversal.

• Doji : The market's bullish and bearish forces are balanced, often appearing at the end of a trend, indicating uncertainty.

2. Analysis of common technical indicators

Technical indicators can quantify market trends and help traders avoid relying solely on intuition. The three most common types of indicators are:

1. Trend indicators

• Moving Average (MA) : Smoothes price fluctuations and identifies medium- to long-term trends.

• MACD : Identify trend strength and buy and sell signals through the difference between the fast and slow moving averages and the histogram.

2. Oscillator indicators

• RSI (Relative Strength Index) : reflects the overbought or oversold state of the market, with commonly used thresholds of 70 and 30.

• Stochastic : Measures price momentum by comparing the closing price with the price range.

3. Volatility Indicators

• Bollinger Bands : Use price standard deviation to form upper and lower bands to reflect the market fluctuation range.

• ATR (Average True Range) : Measures market volatility and is used to set stop-loss and position control.

III. Practical Application and Risk Warning

• Combined use : K-line patterns and indicators need to be used in combination, as a single signal can easily lead to misjudgment.

• Multi-period verification : Multiple confirmations at the 1-hour, 4-hour, and daily levels can improve signal reliability.

• Risk management : No matter how accurate the analysis is, stop-loss and position management must be strictly set.

✅ Summary:
K-line patterns are the "language" of the foreign exchange market, while technical indicators are the "tools". Beginners should start by mastering the most classic K-line patterns and common indicators, and gradually form their own trading system.