Technical Analysis

Simple Moving Average (SMA)

The SMA averages the last N closing prices with equal weight, smoothing out daily noise so the underlying trend is visible. The slope of the line is what matters: a rising SMA confirms an up-trend in CHF/EUR; a flat SMA implies a range; a falling SMA confirms a down-trend.

Cross-overs of two SMAs are the most-cited momentum signal in FX. The "golden cross" (SMA-50 crossing above SMA-200) flags the start of a major up-trend; the "death cross" is the mirror-image bearish signal. For shorter-term trades, SMA-20 × SMA-50 cross-overs are the standard.

Parameters: change the period to match your time horizon. 20 days ≈ one trading month, 50 days ≈ a quarter, 200 days ≈ a year.

Exponential Moving Average (EMA)

The EMA solves a real weakness of the SMA: equal weighting means a price 50 days ago matters as much as today's. The EMA fixes this by decaying old observations geometrically, so recent prices dominate. The result reacts faster to fresh information — exactly what you want when central-bank decisions or surprise data move CHF/EUR sharply.

Common settings include EMA-9 and EMA-21 for swing trading, and EMA-50 / EMA-200 for trend confirmation. Many systematic FX strategies use EMA cross-overs in place of SMA crosses precisely because the faster response shortens drawdowns at trend turns.

Trade-off: faster reaction also means more whipsaws in choppy or range-bound markets. Pair the EMA with Bollinger Bands or ADX to filter signals.

Bollinger Bands

Developed by John Bollinger in the 1980s, Bollinger Bands wrap a simple moving average with two bands placed k standard deviations above and below it. They are the simplest and most popular volatility envelope in technical analysis.

Three setups dominate practical use on FX:

• The squeeze. When the bands narrow to a multi-month low, realised volatility has compressed — and a directional breakout typically follows.
• Band rides. Persistent closes outside the upper band in an up-trend ("walking the band") confirm trend strength rather than overbought exhaustion.
• Mean reversion. In ranging markets, fades from the outer bands back toward the middle SMA work — confirmed by RSI exiting an extreme.

Parameters: the canonical setting is 20, 2σ. Reduce k to ~1.5 for a tighter envelope on lower-volatility crosses (e.g. EUR/CHF), raise to ~2.5 on commodity-linked pairs (e.g. AUD/USD).

Relative Strength Index (RSI)

Wilder's RSI (1978) maps recent price action onto a bounded 0–100 oscillator. It is arguably the most widely-used momentum indicator in any market. The default RSI(14) on daily bars is the institutional convention.

The classical interpretation: RSI > 70 = overbought, RSI < 30 = oversold. In practice strong trends in CHF/EUR can keep RSI overbought or oversold for weeks, so use the level as a warning, not an automatic reversal trigger. Wait for RSI to cross back through the threshold for a higher-quality entry.

The most reliable RSI setup is divergence:

• Bearish divergence — price prints a new high, RSI prints a lower high. Up-trend momentum is fading.
• Bullish divergence — price prints a new low, RSI prints a higher low. Down-trend momentum is fading.

Parameters: raise the period to 21 to smooth weekly noise; drop to 7–9 for sensitive intraday systems. Adjust the OB/OS thresholds (e.g. 80/20) to filter out marginal signals in trending pairs.

MACD (Moving Average Convergence Divergence)

Gerald Appel's MACD combines trend and momentum into a single indicator. The MACD line measures the gap between a fast EMA and a slow EMA of price; the signal line is an EMA of that gap; the histogram visualises the difference between the two.

Three signals are watched on CHF/EUR every session:

• Signal-line cross. MACD crossing above the signal line is bullish; crossing below is bearish. The further from zero, the more meaningful the cross.
• Zero-line cross. When the MACD line itself crosses zero, the fast EMA has overtaken the slow EMA — confirmation of a fresh trend.
• Histogram divergence. Shrinking histogram bars while price keeps trending warn that momentum is fading before any line cross occurs.

Parameters: (12, 26, 9) remain the daily-bar standard. Tighten to (5, 13, 5) for intraday FX systems; widen to (19, 39, 9) for a smoother weekly view. The fast period must always be smaller than the slow period.