The Importance of Technical Analysis in Forex

By learning about technical analysis, understanding why it is important can provide the motivation to understand the basics in a more comprehensive way. While minor daily analysis varies depending on the market, currency markets seem to be particularly influenced by them.




What everyone is doing

The main reason why technical analysis is important is simply that many operators are studying. While there are a lot of indicators and magical systems out there, or at least claims to them, the truth is that some parts of the technical analysis are simply effective because many people are convinced that they are.

In essence, the test measures where supply and demand meet. In other words, where they are more contracts that required a quantity available financial instrument, or vice versa. The fact that a good technician can identify where large quantities of orders are coming into the market will give them a "warning" about where they would like to participate in the markets. Even traders who often reject technical analysis have a general idea about important areas.

One of the most common forms of technical analysis is based on Fibonacci. The mathematician Leonardo Fibonacci discovered in the Renaissance that there is a natural order of repeat numbers in nature, from the rivers to the tops of the mountains. Many crops are played back using these relationships, and can even be used to measure human characteristics. It suffices to say that someone had the idea of ​​applying these percentages to a chart, and Fibonacci retracement tool was born. Is there some magical significance of numbers that can make us better operators? That's hard to say, but the fact that many people are convinced of it seems to confirm time.

Ignoring her inner voice

Another reason for the technical analysis before placing a call on the Forex market is because it will help reduce the urge to trade based on their gut reaction, which is the most common way traders lose money in the forex market and a bad habit in operations that is difficult to break without an alternative solution.

The scope of technical analysis includes many different types of indicators. Some measure the strength of the trend, while others measure the momentum in relation to the current movement. The field is very wide and varied from merchant to merchant, but the reality is that many large companies hire analysts to help with your trading techniques strategies. With this in mind, you have to understand that there are a lot of great players out there that, at least, are paying attention to the art and are operating accordingly, which means it's probably a good idea for you to do same.

One thing that most traders should consider: Technical analysis is a great way to look at the markets and predict trends, but it is simply a tool, not the only form of analysis that a trader can use. Most technical traders also use some fundamental analysis, perhaps even news and analysis to align the best trading opportunities. However, there is something to say about the idea that the news are available today in charts, technical analysis and focus on the "what" instead of "why" a couple move to a particular mode. At the end of the day, that's what matters, not the hypothetical economic arguments. The price is everything, and this is the importance of technical analysis.