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.

Technical Analysis Can Help You Trade Better In Forex Trading:

As a beginner there are two types of trading strategies you can adopt. The strategies are fundamental analysis and technical analysis. Technical analysis is a great tool to trade in the market and achieve success but I have always almost heard that people say that they had tough luck with charting tools and technical analysis software.

The truth is that you should know how to use the software effectively and then you can achieve success with the technical analysis. There are errors that people make which makes them think that technical analysis is not helping them.

The basic error traders make is that assuming that technical analysis will help them reach answers to what is the price is going to be. That is not going to happen, the technical analysis will always tell from the price trends and the historical trading patterns that yes at this level there will support and there may be levels where you can buy or sell. Never assume that there is going to be a price prediction. Use accurately the technical analysis and you will be making an informed decision about the prices. Also, make sure that you use breakout to your advantage and trade accordingly to make money.

Technical analysis software help you guide easily through these issues but then as with computers you need human intelligence to decipher the data presented. So if the technical analysis software tells you a thing then make sure that you apply your intelligent guess on top of it. That way you will be reasonably sure that you will profit from the technical analysis.

As always the best strategy is to keep it simple when comes to using indicators. Stick to basic indicators and you will be on track. Use 5 or 6 or ten indicators and you will be confused as to what is happening to the charts at any given point in time.

Forex charting is simple tool to help you benefit but do not bend it to suit your decisions and never try to evaluate your past strategies from the forex charting. This is known as curve fitting and it will do more harm than good. There are guide available for giving you help on how to read the charts and also how to use them as excel based plug ins.

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