What is Technical Forex Analysis?

The Technical Forex analysis is concerned with what has actually happened in the forex market, rather than what should happen. A Technical Forex Analyst will study the price and volume movements and from that data create charts to use as his primary tool. The Technical Forex Analyst is not much concerned with any of the “bigger picture” factors affecting the forex market, as is the fundamental forex analyst, but concentrates on the activity of that instrument’s market. Technical Forex Analysis is based on three underlying principles:

Forex Market action discounts everything

This means that the actual Forex rates is a reflection of everything that is known to the Forex market that could affect it, for example, supply and demand, political factors and market sentiment. The pure Forex Technical analyst is only concerned with Forex rates movements, not with the reasons for any changes.

Forex Rates move in trends

Technical Forex analysis is used to identify patterns of forex market behavior which have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. Also there are recognized patterns which repeat themselves on a consistent basis.

History repeats itself

Chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little with time.

List of categories of the technical Forex Analysis theory:

Indicators (Oscillators, eg: Relative Strength Index RSI)

Number theory (Fibonacci numbers, Gann numbers)

Waves (Elliott wave theory)

Gaps (High-Low, Open-Closing)

Trends (Following Moving Average)

Chart formations (Triangles, Head & Shoulders, Channels)

Technical Forex Traders use Forex trading information (such as previous prices and trading volume) along with mathematical indicators to make their Forex Trading decisions. This information is usually displayed on a graphical chart and is updated in real time throughout the trading day. Technical Forex traders believe that all of the information about a Forex market is already included in the price movement, so they do not need any other fundamental information (such as earnings reports). There are many different types of charts and many different mathematical indicators. Some indicators are better suited to short term Forex trading, and others are better suited for longer term trend following Forex trading. Individual Forex traders are usually technical Forex Traders. Technical Analysis appears to have been used at least 200 years ago in Japan. Modern Technical Forex Analysis is usually performed by the Forex trader interpreting their charts, but can just as easily be automated because it is mathematical. Some Forex traders prefer automatic analysis because it removes the emotional component from their Forex trading, and allows them to take trades based purely on the Forex trading signals.


What is Technical Forex Analysis?
Trend Line at Forex Market
“Pivot Point” Calculation
Understanding "Support" and "Resistance"
What is Forex indicator? 
How to download indicator at Metatrader?