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Technical Analysis Forex - Part One

Technical analysis is defined as “research of market trends that mainly uses graphs to predict future price trends”. To make foreign currency trading profitable, you need to buy when the price is going up or about to go up, and sell when the price is going down or about to go down (you can also make a reverse profit). 

Most successful traders believe that trading should be based on “systems”. In other words, indicating what a transaction is and when to make a transaction is not intuitive, but a prior decision by the trader as to the conditions for opening or closing a given position. 

However, in order to be able to make decisions based on the necessary advances, it is necessary to know what methods of market analysis exist and how to use those same methods. The main methods are: basic analysis, technical analysis or a combination of these two methods.

 

Technical analysis is a method that allows practitioners to assess the best time to initiate and close transactions for the purchase or sale of financial assets or when to withdraw them from the market.

 For that, it uses diagrams and theories about its dynamics and complementary mathematical statistical studies (technical indicators). Technical analysis has its flaws, but it is a powerful tool that can help investors achieve consistent investment returns.

 

A trader’s main goal is to be able to correctly predict the price of a particular asset or currency pair in the next minute, five minutes, hours, days, weeks or any other period of time. Many methods have been developed over decades to achieve these goals. 

The basic assumption of technical analysis is that the actions, trends and configurations of the past are repeated with sufficient precision. Traders can use technical analysis as a basis for making decisions and continue to profit from short-term market fluctuations.

 

Technical analysis has a variety of tools, such as technical indicators, candlesticks, Fibonacci, graphic patterns, support and resistance lines, etc. Proper technical analysis uses some of these tools.

 Technical analysis is a combination of science and art. In order to make correct decisions, in addition to technical analysis, it is also important to monitor economic and political moments (important political or economic facts can change the forecasts obtained in technical analysis). The market is not strictly a technology. In that case, mathematicians and programmers will get rich by analyzing the behavior of previous assets.

 

In the Forex market, we can buy first and then sell more expensive things, or sell first and then buy cheaper things. The question of whether prices rise or fall is irrelevant. The important thing is that your trading direction is the same as the price direction! ! ! Technical analysis will help you a lot. 

The application in foreign exchange transactions can trigger feelings that range from euphoria to frustration. Technical analysis helps to “control” these feelings. As a high-risk investment, caution and experience are essential.



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Mick

Mick

Mick is Editor in Chief and writer here on 361forex. I have been involved with the financial market for over 10 years as a self-taught professional trader and financial manager. Other features he loves to ride his bike on weekends, loves movies and going out with friends.

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