September 07, 2017
Technical Analysis is a framework — the skeleton of the market used by traders when they study price movement. It is a very important scale. There is a theory that goes along with this analysis which includes that one person can look at any historical price movement and then determine what the current trading conditions are and what the potential price movement will be.
There is main evidence that is pretty much theoretical, and it is that all current market information can be reflected by the current price. If the determined price reflects the information in the market, then the price action is all that you really need to make the best trade decision.
Technical analysis is literally all about history repeating itself, and you having to pick up on the trends and pattern. The price level that is held as a key support or even a type of resistance in the past market history, encourages traders to keep their eyes open for the pattern. The historical price level is what they base their traders around.
If there have been similar patterns that form in the past in the market, then this is what traders will have to look for when making trades. This is because trade ideas are formed which allow them to believe that the price will act the same way that it once did before.
When you’re a forex trader, and someone mentions technical analysis, the first thing that will pop into your mind is a chart. This is because that is what technical analysis uses, and it is the easiest way to visualize the historical data that you need to remember. When you look at the past data that is presented on the chart, then you can base your future trades off of the history of the old trades. These charts are actually patterns and indicators that tend to turn into wonderful trades that are self -fulfilling.
When more traders start looking for trends on the charts in the history of Forex, this is when the trends and patterns are more likely to repeat themselves in the markets, which mean better payouts for the traders. Technical analysis is a very subjective way to go about trading. Even though you might be looking at the same chart as another trader, doesn’t mean you both will make the same trade since every trader gets something different from each chart.
You have to understand the concepts behind technical analysis to keep up with forex trading, and there can be a lot to learn, such as Fibonacci values, pivot points, and Bollinger bands.