The Trend is Your Friend
Forex technical analysis is largely based around
forex market movement trends, thus creating the widely used phrase ’the trend
is your friend’ amongst traders. Buying and selling at the right time is the
key in maintaining good levels of profits, following a trend is also about knowing
where to entry a trade and more importantly where to exit.
Support and Resistance
Support and resistance is the basic of forex
technical analysis. Support and resistance levels are points where a chart
experiences recurring upward or downward pressure. A support level is usually
the low point in any chart pattern (hourly, weekly or annually), whereas a
resistance level is the high or the peak point of the pattern. Buying and
selling at the support and resistance points makes a greater profit margin as
long as they remain unbroken.
History Tends To Repeat Itself
Another
important idea in technical analysis is that history tends to repeat itself,
mainly in terms of price movement. The repetitive nature of price movements is
attributed to market psychology; in other words, market participants tend to
provide a consistent reaction to similar market stimuli over time. Forex
technical analysis uses chart patterns to analyze forex market movements and
understand trends. Although many of these charts have been used for more than
30 years, they are still believed to be relevant because they illustrate
patterns in price movements that often repeat themselves.
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