Forex [also known as Forex Trading or fx] technical analysis is a widely used method of currency trading worldwide, based on three basic principles. The first principle is that foreign exchange market behavior will be discounted. The actual market price reflects all information known to the market that may affect price movements. Pure technology analysts only focus on price movements, not on the reasons for any changes.
Second, the price trend. The price can move in three directions, ie the price can move up, down or laterally. Once any trend in these directions is in effect, it will usually continue and produce a trend. Technical analysis is also used to identify patterns of market behavior that have long been considered important. As long as you can identify and figure out what they are, these patterns will usually run in the same way as in the past. They have been shown to be consistent in predicting future trends. If you can correctly identify the chart mode and the next trend in price, you will be able to limit losses and maximize profits.
Third, history repeats itself. Technical analysts believe that investors collectively repeat the pattern of their investment behavior. They tend to respond the same way to different types of stimuli such as economic stimulus data or other news. Since the behavior of investors is repeated so frequently, it is possible to plot identifiable market patterns for analysis.
Therefore, traders who are purely technical analysts will not have to worry about market news. He will use the chart mode because the market has considered the news and taken the appropriate action. However, despite its widespread use, this trading method has some drawbacks.