3 Principles of Forex Technical Analysis

Forex technical analysis (also known as foreign exchange or fx), which is a widely used currency trading methodology worldwide, is based on three basic principles. The first principle is that the fx market does everything. The actual market price reflects all that is known in the market and which could potentially influence the movement of prices. The pure technical analyst deals only with price changes and not with the reasons for any changes.

Second, prices fluctuate in trends. The value can be moved in 3 directions, that is, it can be moved up, down or sideways. Once a trend in either of these directions is usually in place, we will persist and create a trend. Technical analysis is also used to identify forms of market behavior that have long been recognized as important. These standards usually behave the same way as before, as long as you recognize and verify what they are. They have proven consistent in predicting future movements. If you are able to correctly map the patterns of the maps and what the next price movement is, you will be able to reduce your losses and maximize your profits.

And third, history repeats itself. Technical analysts believe that investors collectively replicate their investment behavior patterns. They tend to act and react in the same way to different kinds of stimuli, such as financial data or other news. As investor behavior is repeated so often, identifiable market models for analysis can be recorded.

Therefore, a trader who is a purely technical analyst will not worry about market news. It will use mapping templates as the market has taken into account the news and acted accordingly. However, although widely used, there are some disadvantages to this trading methodology.