Technical Analysis: Introduction

What is technical analysis?

Technical analysis is used to predict the future movement of prices through examination of the past market data. Technical analysis is used by most of the traders to obtain an insight into the history of an investment’s prices. All traders, even those who are not experts in Forex trading always consult a chart to make sure that they are trading at a fair price or selling at cyclical top.

Assumptions of Technical analysts

The fundamentals of the Forex market are reflected in the price data. Different opinions, mood and other fundamentals of market do not have to be studied. The pattern in which history repeats itself is known as signals. Signals are generated by the price movements. The goal of a technical analyst is uncovering the prevalent market signals by the examinations of past market signals. Prices always move in trends. It is believed that the fluctuations in prices are predictable and not random. Once a trend sets in, it continues in the same pattern for a while.

All private investors have access to various tools of technical analysis so that they can calculate and make their own trading decisions. Traders have been making use of technical analysis for a very long time. Due to this, it premises are based on prolonged observation, experience and are extremely reliable. Traders in Japan make use of candlestick technique in Forex Technical analysis.

In technical analysis, there are three basic suppositions. These are:

    Consider everything at market movement.
    There is a purpose behind price movement.
    History repeats itself and its occasions.

On the basis of these statements, it is possible to describe technical analysis as mathematical analysis of the historical data as well as computation of price forecast. The basic aim of technical analysis is to device a chart pattern for price movement. Anyone who takes decision in trend direction can gain profit from Forex trade. When there is uptrend in the market, one should take a buying decision, whereas a selling decision during downtrend in market. Different patterns are used in the technical market to create price charts which helps in comprehending the future market prices.

For most traders, technical analysis has proved to be one of the key factors to be successful in Forex trade. It basically involves the analysis of historical market prices in order to predict price trends and obtain a picture of price movement.

Traders who make use of technical analysis invest money introspectively and monitor daily prove movements to obtain profit. Theoretical knowledge together with thoughtful strategy can lead to success and good results as well as positive trading. However, be careful not to use methods which you do not understand properly. Always use one which you know well and then invest cautiously to be successful in Forex trading. <!– /* Font Definitions */ @font-face {font-family:Georgia; panose-1:2 4 5 2 5 4 5 2 3 3; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:647 0 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:””; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:”Times New Roman”; mso-fareast-font-family:”Times New Roman”;} span.bodycopynew {mso-style-name:bodycopynew;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} –>

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