What Is Technical Analysis ?

If there were a direct relationship between the fundamentals of a currency and its price, then life would be much simpler. But the price of anything and everything represents a consensus; an agreement. The price of something is merely that at which one person agrees to buy and one person agrees to sell. The price at which a trader agrees to buy or sell depends mainly on his expectations. If he expects the price to rise he will buy, and if he expects the price to fall he will sell. The market is made up of millions of active traders all continually expressing their expectations through trades. The history of price action is therefore a history of traders' expectations. Through a methodical analysis of the mapping of price action, it is possible to make an informed forecast of future price action.

This is the core of Technical Analysis.Technical analysis is a method of forecasting price movements by looking at purely market-generated data. The tools of technical analysts are price charts and graphs. The method is based on three postulates. All market fundamentals are inherent in the actual market data. The market takes everything into account. Price movements mirror market participants, moods, interests, and opinions on further currency dynamics. Prices move in trends. In other words, technical analysis assumes that price fluctuations are not random or unpredictable. There are three possible trends: up, down or sideways. History repeats itself and therefore markets move in fairly predictable patterns. The goal of technical analysis is to uncover the patterns given off in a current market by examining past market patterns, often designated as signals.The primary tool of technical analysis is the chart and it is dedicated to identifying the patterns and trends of prices. These patterns and trends are then projected into future time to enable the trader to make informed decisions based on calculated risk. Technical analysis does not guarantee success, but a methodical application of its principles may improve your performance as a trader.