3 Principles of Forex Technical Analysis

Technical analysis of forex trading (also known as foreign exchange or foreign exchange), a methodology widely used in currency trading around the world, is based on three fundamental principles. The first principle is that the foreign exchange market currencies depreciate everything. The actual market price is a reflection of what is known to the market and which may have an impact on the price movement. A pure technical analyst is only interested in price movement and not for reasons of any changes.

Second, prices are moving in trends. The price can move in 3 directions, i.e. it can move up, down, or side. Once there is a trend in any of these directions in effect, it will usually continue and create a trend. Technical analysis is also used to identify patterns of market behavior that have long been recognized as important. These patterns usually behave the same way they were in the past, as long as you can see what they are. They proved steadfast in predicting future moves. If you are able to correctly identify chart patterns, and what is the next price action, you will be able to reduce your losses and increase your profits.

Third, history repeats itself. Technical analysts believe that investors collectively replicate their investment behavior patterns. They tend to behave and interact in the same way with different types of incentives, such as economic data or other news. Because investor behavior repeats itself repeatedly, it is possible to draw known market patterns for analysis.

Therefore, a trader who is a pure technical analyst, will not be interested in market news. He said he would use chart patterns because the market had taken the news into account and acted accordingly. However, despite their widespread use, there are some disadvantages of this business methodology.

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