Forex technical analysis is a research method whose objective is to find profitable ways to trade Forex. This type of analysis differs from Forex fundamental analysis which has the same objectives Fundamental analysis looks at such things as the gross domestic product, interest rates, employment numbers, trade balance, and other important economic factors. Technical analysis, on the other hand, uses three basic sets of data in various combinations. The data that is analyzed is price, time, and volume.
Technical analysis is commonly used in order to create a Forex trading system. The system then takes the price, time, and/or volume data for a currency pair and generates Forex trading signals. These signals in turn are instructions telling the trader what action needs to be taken and when that action needs to be taken.
Forex technical analysis has really become popular over the last number of years. One of the reasons for this is the readily available data. The majority of Forex brokers offer free quotes and many even offer free Forex demo accounts which traders can use to practice their trading skills. There is also a wide variety of Forex trading software which makes it possible for more people to analyze the markets with greater ease and efficiency.
One of the basic tools that many used in technical analysis is Forex charts. A Forex chart is basically a graph of Forex data over time. Charts are great visual aid and allow traders to see Forex price movements. Using charts for your analysis lets you see where Forex prices are in relation to one another. This is particularly important because it will allow you to analyze past price data and find price patterns. Finding price patterns which are likely to repeat themselves can be particularly useful. For instance, if you locate a price pattern which tends to precede market movement in a certain direction, then you may really be onto something. The key is finding price patterns which reliably repeat themselves. In other words, you want to find price patterns that have a good probability of allow you to anticipate profitable market direction.
In my humble opinion the best way to learn Forex trading is to learn the ins and outs of Forex technical analysis. By learning to analyze the Forex markets you will learn to make your own Forex trading decisions. This will allow you to create Forex trading strategies which will be best suited for you and your individual lifestyle and financial situation.
