Technical Analysis Applications in the Global Currency Markets
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Technical analysis is the study of market prices with the intention of
making a final decision for profitable financial investment. Today, with the huge online
resources every web trader both professional and newcomers could practice on the technical
analysis. Technical analysis uses a wide variety of charts that show price over time.
Technical analysis is based on three general principles:
1. Money market movement is taken into consideration by every web trader
The price factor is always impacted by external features like political, economic and psychological. Any small influence of these features is considered and reflected by a price. That is why it is an important point of comprehensive study.
2. Price movement moves in a certain direction
For applying a technical analysis it is necessary to understand the importance of market tendency. The main purpose of the technical analysis is the determination and analysis of price movement tendency in order to trade profitably in the Global Forexmarket in agreement with this market trend. Generally, there are three trend types in the money market:
- Bullish when the price moves up
- Bearish when the price moves down
- Flat that has no certain direction for price movement
As a rule, during the process of price movement every trader can obtain each of these trend types, but only one of them can be the most important. Always remember, that tendency change takes place only after it gives certain signals.
3. History repeats itself
In all times of the human history the trading techniques are always repeated and the market rules and analysis types have never changed. The market dynamics is primarily studied by means of charts during a technical analysis. The following are the main tools:
- Japanese candlesticks
- Bar chart (intervals)
- Line chart
- Trend indicators
- Wave analysis
Another important reason why most Forex web traders use technical analysis is that it is very practical and easy to use. It contains important financial facts and figures, real information that cannot be guttered from other sources. This means that you can make more accurate statements for successful trading. Besides, Technical analysis is easier to learn than fundamental one. Many years are required to gain experience in fundamental analysis. Technical analysis can be an initial forecasting tool in the foreign currency market. This analysis method is successfully used by professional traders and analysts of Forex.