Technical Analysis in Forex

There are 2 basic types of analysis you can take when approaching the forex:

Technical Analysis and Fundamental Analysis

There has always been a constant debate as to which analysis is better and which analysis is suited for your trading. So before choosing which is best, you need to know a little bit of both.

This time, we'll talk about Technical Analysis.

Technical Analysis is a method of predicting price movements and future market trends by studying charts of past market action which take into account price of instruments, volume of trading and, where applicable, open interest in the instruments.

Focuses on what actually happens in a market. Charts are based on market action involving:

  • Price
  • Volume
  • Open interest (futures only)

The most IMPORTANT thing you will ever learn in technical analysis is the trend. The reason for this is that you are much more likely to make money when you can find a trend and trade in the same direction. Technical analysis can help you identify these trends in its earliest stages and therefore provide you with very profitable trading opportunities.

The technical trader is concerned with studying patterns of price movement on the chart in order to predict the direction of current and future trends in the Forex market. The decision to buy, sell, or hedge a current position – or to stay out of the market entirely – is made upon this analysis. Identify recurring patterns and make educated assessments to guide your decisions; should you initiate a trade at the current price, or set your system to open a position at a future price?

The goal of the technical analyst is simple: to make profitable Forex trades by identifying past patterns that have historically led to a predictable outcome. However, the potential risk should always be considered. A recurring pattern is not precise and does not guarantee a desirable or expected price movement.

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