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 Introduction To Forex Technical Analysis

The technical analysis takes a look at the markets past price movements to determine where the numbers will go in the future. Most investors who employ this type of analysis look mostly at price data, but sometimes information such as volume and open interest in futures contracts are also taken into consideration.

Technical analysis is almost always used on some level because price charts provide a good visual representation of the price history of a particular currency. At the very least, they can help you determine ideal entry and exit points for a trade based on the historical data. You can decide whether or not you’re buying at a fair price, selling at the top of a cycle, or entering into a shaky market.

Most traders consider technical analysis to be of critical importance even though they may also use fundamental analysis to support and confirm the strategy suggested by technical analysis. Unlike fundamental analysis technical analysis can be applied to many different currencies and markets at the same time. Since fundamental analysis requires detailed knowledge of the economic conditions of a certain country it is very hard for any single trader to perform proper fundamental analysis on more than a few countries.

Technical analysis is not an exact science. It's an art and takes considerable experience. Not all studies work the same for every instrument traded. One study may give excellent buy and sell signals while another may not work for you at all.

Between the technical analysis methodologies which can be used when currency trading:

Elliott Waves

Fibonacci Studies

Parabolic SAR

Pivot Points

Before you start Forex trading it is a good idea to acquaint yourself with market behavior by following Forex charts for a period of time and by studying the movements and gaining an understanding of trends.



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