Technical Analysis in Forex Trading

Along with fundamental analysis, technical analysis is one of the two main methods of informing oneself and building a stronger position to profit from the Forex market. While fundamental analysis allows you to predict a currency’s movement by looking at a country’s political and economic position, technical analysis has more to do with looking at collected market data and using it to predict future movement. For example, this approach is commonly used on the stock market, where historical data is essential to predicting future performance.  

While a fundamental analysis will look at the reasons for market movement – allowing us to know why something happened – the technical analysis of the same market will tell us exactly what happened. That is to say that it will give us the raw data. Fundamental analysis requires a comprehensive view and can be overly time-consuming for those who are disinterested in politics. If these people are strong technical analysts, they can usually learn enough from the movements themselves. Whatever the reason for the movement, the fact is that currency prices follow trends. 

Regardless of anything else, people know that patterns have emerged in how foreign currencies behave, patterns that have held true for more than a century. These patterns mirror human behavior—one of the few constants in the world—and, therefore, are an excellent way of predicting the future. You may not know who the president of a particular country is, but if you know how its currency performs over a period of time, you are well within your rights not to care.