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What is Technical Analysis?

Technical analysis is a method used in the Forex, as well as in other financial markets, to predict the trend a currency pair is likely to follow. It does this by primarily using charts that show its past movements which are helpful in determining future trends.

The concept of technical analysis relies on the the fact that currencies have patterns that they tend to repeat over the course of an hour, a day, a week, or even longer. By knowing the unique identifying features of each pattern, traders can spot which trend a currency is on when it is just beginning to follow it so that they can capitalize on it by opening the appropriate position according to where it will be in the future.

To help traders out in conducting technical analysis, brokers now offer many tools such as technical indicators and signals which can automate computations and display it as a graphic on charts. Because of this, it is common to see experienced traders keeping track of different kinds of measures such as support levels, moving averages, channels, and several others all at the same time.

The important part of this method is to be able to gather a large amount of data that will enable you to make a rational prediction. They may not always come true, but technical analysis has proven to be effective for many successful traders.
 

Created by : Belstrong
Published : 07 Jul 2015

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