Traders must be good at technical and fundamental analysis to find and seize trading opportunities. Here are some important technical analysis strategies to help you confirm winning trades.
3 Technical Analysis Tips for Successful Online Trading in South Africa
Online trading in South Africa has grown exponentially as more people seek to make money in the global financial markets. The local online trading industry is projected to be worth $1 billion (R18.73 billion at the time of writing). This is partly due to a lot of trading platforms that have made it easy for people to trade online.
But how do traders find success in the highly speculative industry? Traders need to be good at technical and fundamental analysis to find and grab trading opportunities.
Here are some important tips to steer traders toward success.
Technical Analysis Tips to Improve Odds of Success Online Trading in South Africa
Technical analysis in online trading involves studying historical price movements, charts and patterns to predict the future direction of the market.
Traders use indicators, trends, and chart formations to make informed decisions about buying or selling currencies. Traders need to know how to do technical analysis if they want to capitalize on market trends and patterns.
If you are keen on improving your effectiveness in conducting online trading in South Africa, here are some technical analysis tips you need to have at your fingertips:
Don’t Use a Moving Average Bigger Than 200 Periods
Moving averages are useful technical indicators because they split a chart into two parts – bullish and bearish. When the price is above the moving average, it is bullish. When it is below, the price action is bearish.
Moving averages are either fast or slow. Fast ones use just a few periods and are more reactive, while the slow ones use more, and as a result, are less reactive to the price. As a rule of thumb, the more periods used, the slower the moving average is, and the stronger the support and resistance level it offers.
However, using more than 200 periods to plot a moving average is not recommended. The reason is that the moving average becomes flatter with more than 200 periods; thus, it loses its significance for the technical trader.
Stay In a Trend as Long as the Trending Series Remains Intact
A bullish trend is characterized by the market making higher highs and higher lows. Until the series remains intact, the path of least resistance is to stay with the bullish trend and to buy when the price dips.
On the contrary, a bearish trend is characterized by the market making lower lows and lower highs. Selling the spikes is the simplest way to trade the market.
Understand a Currency’s Overbought and Oversold Territory
Oscillators travel between two extreme levels – overbought and oversold. It is said that the technical trader should sell a market when an oscillator reaches overbought territory and buy it when the oscillator shows oversold conditions.
But this is not always the case.
Some of the most powerful trends unfold when a market is overbought or oversold. Therefore, a technical trader should be aware that a market may stay overbought and oversold while trending conditions are very strong.
Summary: Mastering Technical Analysis for Online Trading in South Africa
Mastering online trading in South Africa demands more than just luck – it requires a solid grasp of technical analysis. It’s a continuous journey and traders need to keep learning.