Forex Technical Analysis for The Novice Investor:

Technical analysis tries to forecast future price movements by analyzing past market data.
One of the basic principles of technical analysis is that historical price data predicts future price action.
Whereas the forex is a 24-hour market, there tends to be a significant amount of data that can be used to determine possible future price activity. This makes it an ideal market for traders that use technical tools, such as trends, charts and indicators.

There are three basic steps forming the basis of technical analysis:

1. Market action discounts everything! This means that the price is a reflection of all components that is known to affect the market. Some of the factors are: fundamentals, supply and demand, political pressure factors and market sentiment. Pure technical analysis is only concerned with up and down price movements, not with the reasons for those changes.

2. Prices move in trends. Technical analysis is used to calculate patterns of market behavior. That market behavior has been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. You should also be aware that there are patterns that repeat on a predictable basis.

3. History repeats itself. Forex Trading chart patterns have been recognized and categorized for over 100 years, and this leads to the conclusion that human psychology changes little over time. Since patterns have worked well in the past, it is assumed that they will not change in the future.

Technical analysis goal is to forecast price trends in future based on historical data along with the volume. Any private investor can access the technical analysis tools in order to compute his or her trading decisions. Technical analysis has been in use for centuries, that's why its premises are based on the experience, prolonged observation and can be considered quite reliable.