Forex Technical analysis
Technical analysis is one of the two methods of analyzing Forex(fundamental analysis is the other).Technical analysis uses price charts to better understand where price has been and where it could be going.Unlike fundamental analysis, technical analysis is focused on what has actually happened in the Forex market, rather than what should happen.
There are certain technical analysis tools such as the relative strength index (RSI), the Elliott waves method, the parabolic SAR methodology, the stochastic oscillator, gaps and trends.Technical analysts are confident that historical performance of stocks and markets denote future performance. They use charts and other tools to identify patterns that can suggest future activity.They study the price and volume movements and create charts from that data. So forex technical analysis focuses on what actually happens in the market,it's always focused with the pricing and time factors rather than the factors affecting the market. Therefore we can say that technical analysts study the effects, not the cause of market movement.
Technical analysis is built on 3 essential principles:
1.Market action discounts everything - based on the premise that all relevant information is already reflected by prices.
2.Prices move in trends - technical analysis is used to identify patterns of market behavior .For many given patterns there is a high probability that they will produce the expected results. Also, there are recognized patterns that repeat themselves on a consistent basis.
3.History tends to repeat - Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them.This principle is based on the fact that human psychology changes little over time.Because investor behavior repeats itself so often, technicians believe that recognizable (and predictable) price patterns will develop on a chart.
Common Indicators
Technical traders use many different indicators in combination with support and resistance to aid them in predicting the future direction of exchange rates. Again, learning how to interpret various forex technical indicators is a study unto itself and goes beyond the scope of this forex tutorial. If you wish to learn more about this subject, we suggest you to search in our free forex e-books or forex books section of our site or to read our technical analysis tutorial. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
A few indicators that we feel we should mention, due to their popularity, are: Bollinger bands, Fibonacci retracement, moving averages, moving average convergence divergence (MACD) and stochastics.
For more on technical analysis and the forex, take a look at the tehnical analysis articles from investopedia.com ttp://www.investopedia.com/university/forexmarket/forex7.asp
We also recommend you some books that you can easily buy from amazon.com where you surely will find precious information.
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