Technical Analysis in Forex Trading

Forex is basically nothing but the online market where currencies are the objects which are traded. As currencies are the most important commodity in the world its trading is by default creates the biggest and most liquid market by volume in the world, even bigger than any stock exchange market. central banks, hedge funds, large financial institutions, corporations and an average investor , all these groups or people trade in Forex and to make maximum profits they often rely on their instincts or use technical analysis which factors in all the aspects like historical patterns, current economic situation , political sentiment etc. 

The technical analysis is basically using the past performances of currencies to predict their future along with some other important parameters. The technical analysis of the market in Forex plays a crucial role as it is a 24 hour market and there is huge amount of data that can be processed to come towards a reliable decision. This output can often help in making great gains from the market.

The presence of many large players in the forex market makes any inconsistency in the market very short lived. The large players like hedge funds and big banks use advanced computers to continuously monitor the market to find any consistency between various currency pairs . The forex technical analysis helps average traders in this regard by giving them a fair ground to play hands and maximize there profits with their acuity.

Technical indicators like graphical representation of a currency pair can give a fair amount of idea about weather the currency is moving upwards, sideways or remains in range. Trend lines can be useful to be analyzed at a moment when the price is moving in a pattern to make an intelligent prediction. Support and resistance lines can also be noted to understand the movement of a currency. These indicators helps the traders to predict whether a given trend or lack of trend will continue..

It is generally observed that some of the currency pairs are historically show great characteristics of trend while some other pairs (usually not involving U.S dollars) have been range-bound. Accordingly traders can see their technical indicators and make a strategy. Some of the most popular technical indicators are Fibonacci retracement, moving averages, Bollinger Bands, stochastics etc. these indicators either on themselves or in conjunction with some other indicators and chart patterns are very useful.

Technical analysis of the Forex can only play a role in the decision making process of a trader, the ultimate decision is completely based on his/her own discretion. As so many traders around the world are using similar tools and interpreting them accordingly technical analysis can become self fulfilling prophecy. For every trader the conditions will be same but the discretion of individual traders actually determines their earnings and market stability.

An understanding of technical analysis is always beneficial as it gives more data to substantiate the decisions of the traders and they don’t have to rely just on their instincts.