Forex Key > Forex Tutorial > Technical Analysis Online Forex Trading

The other common form of analysis in online forex trading is technical analysis. Technical Analysis is based on the following assumptions:

  1. Price movements are a result of combined market forces. Political events, economic conditions, seasonal fluctuations, supply and demand are all things that can effect currency prices. Technical analysts do not concern themselves with why the market moves, they are only interested in the movements themselves.
  2. Currency prices on the FOREX market follow trends. Predictable consequences have been linked with many recognized market patterns.
  3. Historical trends can be used to predict current price movements. Data on the FOREX market has been collected for the last 100 years, over that time certain patterns have become emergent. Human psychology and the way people react to certain circumstances are the basis of these patterns.

Most traders consider technical analysis to be of critical importance even though they may also use fundamental analysis to support and confirm the strategy suggested by technical analysis.

Unlike fundamental analysis technical analysis can be applied to many different currencies and markets at the same time. Since fundamental analysis requires detailed knowledge of the economic and political conditions of a certain country it is nearly impossible for any single trader to perform proper fundamental analysis on more than a few countries.

For the beginning trader the complexities of technical analysis may seem overwhelming and they may even wonder if it is actually necessary. If you wish to be successful at FOREX trading you must have a strategy. Any strategy can work but technical analysis has been proven as a reliable and effective method of predicting market changes. Many forces can affect currency prices though so technical analysis is no guarantee, most successful traders utilize a combination of technical and fundamental analysis.


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