In foreign currency trading trading “technical analysis” is an industry term, that more often than not, sounds much more complicated than the actual process is. Really, it ought to be referred to as “price analysis”, which would be a more accurate description. With the use of charted data, those who trade foreign currency around the world analyze their market of choice. The objective: determine future price movement. To do this means understanding previous price movement patterns.
The charting of foreign currency price movements creates a visual tug-of-war between buyers and sellers. The large majority of technical traders in the currency market focus their attention on candlestick data, a method of charting that offers a visual interpretation of the high, low, open and close of a currency price within a certain period of time. Combined with various forms of pattern recognition, which will be discussed in further posts, candlestick charting offers traders a visual look at the market’s past prices and trends. Analyzing this historical data in order to predict the movements of future prices is the process known as “technical analysis”. Notice how price patterns formed on the following chart tend to repeat; technical traders attempt to identify patterns of these nature, and base their trades accordingly.
Interbank FX is a good place to start for foreign currency trading information. They have a lot of educational information as well as offering free demo accounts.
