Technical Analysis

Technical Analysis

LETS GET Technical: Technical analysis is the process of analysing a financial instrument's historical prices and other statistics generated by market activity, in an effort to determine probable future prices. For many years, traders active in the stock market and fxcm exchange market have found that one successful way to forecast future movements in rates is to analyze the patterns that can be seen in past movements. This approach is often referred to as technical analysis which actually dates back to the late 1800s. It has gained in importance since the 1990's through the usage of computer models and advanced charting techniques. Currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. A large volume is speculative in nature resulting in a market that frequently overshoots and then corrects itself. A technically trained trader can easily identify new trends and breakouts that could provide multiple opportunities to enter and exit positions.
Disclaimer: Past performance is not a reliable indicator of future results..


Technical Analysis with Charts

The charting of price patterns is one of the classic technical analysis techniques. Charts are historical records of price movements that provide important information needed for the analysis of the trend of currencies. There are no fixed ways to interpret charts but being able to recognize the most basic patterns can help to predict future price movements. Pattern recognition is a hands-on and labour intensive exercise requiring careful visual examination of the price chart. The explanations below are designed to introduce various chart patterns but are by no means complete or conclusive.


Applying Technical Analysis

Charts can be used on an intraday (5-minute, 15 minute), hourly, daily, weekly, or monthly basis. The chart you study depends on how long you plan on holding a position. If you are trading short-term, you may want to look at 5-minute or 15-minute charts. If you plan on holding a position for a few days, you would likely look at an hourly, 4-hour or daily chart. Weekly and monthly charts compress price movements to allow for much longer-range trend analysis.