Forex technical analysis is the framework by which traders study price movements.
The theory behind technical analysis is that a trader can identify current trading conditions and potential price movements by observing past price movements.
Someone who uses technical analysis is called a technical analyst . Traders who use technical analysis are known as technical traders.
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The main reason for using technical analysis is that, in theory, all current market information is reflected in the price.
Technical traders generally believe that ” everything is in the charts!” ”
Simply put, all the basic information is included in the current market price.
If the price reflects all the available information, only price action analysis is needed to make the trade.
Technical analysis examines the pace, flow and trend of price movements.
Basis of technical analysis
Now, have you ever heard the old saying that ” history tends to repeat itself “?
Well, that’s basically what technical analysis says!
If in the past a certain price was considered as a major support or resistance level, Forex traders would keep an eye on it and take the same historical price level into their trades.
Technical analysts are looking for similar patterns that have been formed in the past and form their trading ideas believing that price can probably act similarly before.
Technical analysis has little to do with prediction, but is essentially about probabilities.
Technical analysis is the study of price movements in the past in order to identify patterns and determine future price possibilities.
Good! How can “price movements in the past be studied”?
In the world of trading, when one says “technical analysis”, the first thing that comes to mind is a chart .
Technicians use charts because they are the easiest way to visualize data from the past!
Technical analysts live, eat, and breathe charts, which is why they are often called chartists .
You can look at past data and find trends and patterns that can help you find great trading opportunities.
In addition, the large number of traders who rely on technical analysis makes these patterns and indicator signals come true on their own.
The more Forex traders pay attention to a particular price level or a chart pattern, the more likely it is that the pattern will show up in the market.
Technical analysis is not a fixed fact
However, you should know that technical analysis is very much dependent on the mentality of the analyst.
Just because Hamid and Amir look at exactly the same chart or indicator does not mean that they have the same idea of where the price might go.
The important thing is that you understand the concepts as technical analysis, so whenever someone starts talking about Fibonacci, the Bollinger Band or Pivot points, you will not bleed your nose.
You probably think to yourself, ‘My God, these people are very smart. What strange words “Fibonacci” and “Bollinger”. I can never learn this! ”
Do not worry too much.
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