Technical Analysis

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What Is Forex Technical Analysis?

Technical analysis in Forex is the study of historical price data, primarily through charts and indicators, to forecast future price movements. It assumes that all market fundamentals are already reflected in price.

Core Principles

  1. Price Discounts Everything – All news and fundamentals are already priced in.

  2. Price Moves in Trends – Markets tend to move in directional trends.

  3. History Repeats Itself – Market behavior often follows patterns over time.

 

Popular Tools & Indicators

TOOL/INDICATOR
USE
Support & Resistance
Key price levels where price tends to pause or reverse
Trendlines & Channels
Identify direction and strength of trends
Moving Averages (MA)
Smooth price data to identify trends
Relative Strength Index (RSI)
Measures momentum (overbought/oversold)
MACD
Identifies trend direction and reversals
Bollinger Bands
Measures volatility and potential breakouts
Fibonacci Retracement
Predicts pullback levels in trends

Advantages

  • Great for short-term trading

  • Clear entry/exit signals

  • Can be automated with algorithms

Limitations

  • Doesn’t account for economic fundamentals

  • False signals in choppy markets

  • Needs discipline and practice to master