When it comes to Forex trading, the million dollar question that concerns all processors in the world is how to best predict the future movements of the market. Before moving on, it is important to emphasize that there is not a single way to predict what will happen in the market with 100% accuracy and precision. However, it should be noted that there are various ways to analyze the Forex market and to reach final decisions on different types of currencies, both in the short and long term.
Technical analysis is to predict future price movements based on past price movements. Technical analysis examines price behavior as an indicator of underlying supply and demand factors in the Forex market. In this technique, tables and computer programs are used to determine stock trading volume, and price movements are used to determine trends in the market. The investor makes his decision only after reviewing the trend and evaluating the future trend of the currency pair. Technical analysis can be applied to stocks, indices, commodities, futures or other tradable instruments, but the most popular practice is the Forex market.
Technical analysis is different from basic analysis. First, technical analysis works on the market movement or on the price or value of a currency. However, fundamental analysis works on the factors affecting the supply and demand behind a currency, for example, the US dollar. Second, technical analysis deals with the impact of market movements, while basic analysis addresses the causes and effects of market movements.
Principles of technical analysis
Market discount: Technical analysis indicates that the current price reflects all market information. Market value is determined by supply and demand.
Price movements in trends: Technical analyst believes that profit can only be achieved by following the market trend.
Review of history: The stock price tends to move towards remaining patterns for long periods of time. There are also repetitive table patterns.
Technical analysis is carried out by following the following methods:
Moving Averages: This method helps to determine both long and short term forex trends. There are different moving averages such as simple moving average (SMA) and exponential motion average (EMA).
Tables and patterns: Tables and patterns are also used to determine trends in price movements and to decide on future trading. Some of the popular molds are cup and stalk, head and shoulders, shoot and how many.
Technical analysis is used by:
Daily processors: The daily processor interprets the market to trade on the same day. These people are also known as day internal processors.
Short-term investors: This class consists mainly of forex brokers and technical analysts who trade within short time periods. They also tend to achieve maximum profits in the forex market.
Insurers: These people are big investors with a lot of money and rely on the forex market to protect their own risks.
Strengths of technical analysis:
- Technical analysis can be applied to any financial asset, including interest, investment funds, commodities, futures and of course Forex.
- Technical analysts or investors can adapt their investment styles daily, weekly, intraday, 30 minutes or minutes to minutes.
Attractive aspects of technical analysis:
Technical analysis depends on personal prejudices and can therefore be easily misinterpreted. It is based on the assumption that what happens immediately will continue in the future. There are specific indicators, patterns and rules that do not work in technical analysis.
Today, the world of technical analysis is huge and there are many molds and indicators followed by investors to make successful investments. Technical analysis takes into account that 80% of the market is psychological and 20% is logical.
Conclusion: Technical analysis is a powerful tool to trade in the Forex market despite its reservations. Processors who use tables, patterns, and indicators, such as protectors and logging processors can make enormous profits.