Forex 101: Technical Analysis

“Analysis is the art of creation through destruction.”

― P.S. Baber

Technical analysis is a method by which traders can analyse and predict the price movement of the trading market. It is the most important form of study that a trader requires to be a master. With the knowledge of technical analysis, a trader can never see success, or to be more precise, a person can never become a trader at all.

Simply put, to understand the technical analysis of trading, one must understand the historical price movements and how they correlate and interconnect. Based on this, the learner can determine the present status of the market and predict the price movements with near-accurateness. Technical analysts are the group of people who master this crucial form of trade knowledge. And if traders use technical analysis to trade, which is the majority, they are called technical traders.

“It’s all in the charts!” This is a mantra that technical traders apply to their market analysis. Because it is a fact that the price movement is a mirror of the current market condition. Every little piece of fundamental information is printed in the price fluctuations, and that is why understanding price action is a must to execute a trade. To understand price action, technical analysis studies the flow of the market, rhythm, and trends.

History repeats itself, as the old saying is yet to be true in the case of technical analysis. Let us explain how traders work in one example. If a particular price held a major support or resistance level in the past market trench, the traders would keep a sharp eye on it and construct their trades around that historical price level. Price action, which is what technical analysts look at, will often follow the same patterns over and over again.

Although myths around forex trading are, “forex trading is a game of gambling” or “trading is a game of luck”. But this is nothing but a pure lie. Because forex trading requires intense study to be successful, all possibilities are available for technical analysis. To find the minimum success in trading, technical analysis is a must that has no alternative.