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All markets require careful and detailed analysis to result in profitable trades. Technical analysis is one of the ways of analyzing the forex market. It basically involves studying past market trends.

Technical analysts follow certain assumptions for their analysis:

• Price data reflects all market fundamentals, and nothing else needs to be studied.
• The market does follow trends. The key is to figure out the trend. Once a trend is established, it will in all likeliness continue for some time.
• Previous market trends repeat. One just needs to look for the signals, and identify the trend and the repetition.

Technical analysis sticks to stats and stats only. No emotion, no rumours, no news. It deals objectively, and helps you go through with your planned entry and exit without getting distracted. Technical analysis uses various indicators to study the market. They include:

• Moving Averages which are further divided into:
  
  
  • Simple Moving Average
  • Weighted Moving Average
  • Exponential Moving Average

• Stochastics
• Relative Strength Index (RSI)
• Bollinger Bands
• Moving Average Convergence Divergence (MACD – one of the most widely used)
• Fibonacci Retracements

Price charts are also of different types including the common bar charts, candlestick charts and point & figure charts.

Forex trading is a game of odds. If you can trade the odds, you stand a higher chance of winning. Do not bother with what is making the trends. Bother with the trend itself. The price is changing, and that’s it. Why that is happening doesn’t matter as long as you study the price change accurately. Be objective, be disciplined, and follow the rules. If you can’t follow the rules of your system, you cannot be a forex trader. You won’t fail because your methods were wrong, you would fail because your discipline was poor.

You can compare technical analysts with ship captains who study charts to get from their source to their destination through an ocean that can support them, or drown them. Technical analysis if used correctly can provide you unbelievable income in no time. But you need time to satisfy the pre-requisite of using it correctly.

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