Basic Of Technical Analysis

Technical Analysis

Technical analysis is a method of forecasting of changes in currency rates in the future basing on the information about the market. Technical analysis includes the market data in the past and at this moment of time. By receiving such information, an investor tries to recognize the signals given by the market, or "read" the market.

Technical analysts' exclusive use of historical price and volume data is what separates them from their fundamental counterparts. Unlike fundamental analysts, technical analysts don't care whether a currency pair is undervalued - the only thing that matters is its past trading data and what information this data can provide about where the currency pair might move in the future.

There is a wrong statement that technical analysts ignore fundamental data. Most of successful traders combine technical and fundamental analysis and all of them say that the price reflects all fundamental data. As the price includes such information, a certain pattern forms with the help of which we can predict the further movement of the price.

Technical analysis is based on three assumptions:

• The market discounts everything.
• Price moves in trends.
• History tends to repeat itself.