Introduction Of Technical Analysis
Technical analysis attempts to forecast future price movements by examining past market data.
Most traders use technical analysis to get a "big picture" on an investment's price history. Even fundamental traders will glance at a chart to see if they're buying at a fair price, selling at a cyclical top or entering a choppy, sideways market.
Technical analysts make a few key assumptions:
All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied.
History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals.
Prices move in trends. Technical analysts believe price fluctuations are not random and unpredictable. Once an up, down or sideways trend has been established, it usually will continue for a period.
Get in and get out - at the right time
Traders rely on price charts, volume charts and other mathematical representations of market data (called studies) to find the ideal entry and exit points for a trade. Some studies help identify a trend, while others help determine the strength and sustainability of that trend over time.
Technical analysis can add discipline and minimize emotion in your trading plan. It can be hard to screen out fundamental impressions and stick with your entry and exit points as planned. While no system is perfect, technical analysis helps you see your trading plan through more objectively and dispassionately.
Disclaimer
Foreign Exchange trading carries a high level of risk, and may not be suitable for all investors. Before deciding to trade any Forex Exchange financial instruments you should carefully consider your investment objectives, level of experience, and affordable risk. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with the Foreign Exchange trading, and seek advice from an independent financial advisor if you have any doubts.