The
technical analysis takes a look at the markets past
price movements to determine where the numbers will go
in the future. Most investors who employ this type of
analysis look mostly at price data, but sometimes
information such as volume and open interest in futures
contracts are also taken into consideration.
Technical
analysis is almost always used on some level because
price charts provide a good visual representation of the
price history of a particular currency. At the very
least, they can help you determine ideal entry and exit
points for a trade based on the historical data. You can
decide whether or not you’re buying at a fair price,
selling at the top of a cycle, or entering into a shaky
market.
Most
traders consider technical analysis to be of critical
importance even though they may also use fundamental
analysis to support and confirm the strategy suggested
by technical analysis. Unlike fundamental analysis
technical analysis can be applied to many different
currencies and markets at the same time. Since
fundamental analysis requires detailed knowledge of the
economic conditions of a certain country it is very hard
for any single trader to perform proper fundamental
analysis on more than a few countries.
Technical
analysis is not an exact science. It's an art and takes
considerable experience. Not all studies work the same
for every instrument traded. One study may give
excellent buy and sell signals while another may not
work for you at all.
Between
the technical analysis methodologies which can be used
when currency trading:
Elliott
Waves
Fibonacci
Studies
Parabolic
SAR
Pivot
Points
Before
you start Forex trading it is a good idea to acquaint
yourself with market behavior by following Forex charts
for a period of time and by studying the movements and
gaining an understanding of trends.