There are two major approaches to analyzing the currency market,fundamental analysis and technical analysis. The fundamental analysisfocuses on the underlying causes of price movements, such as theeconomic, social, and political forces that drive supply and demand.The technical analysis focuses on the studies of the price movementsthemselves. Technical analysts use historical data to forecast thedirection of future prices.
The premise of technical analysis is that all current marketinformation is already reflected in the price movement. By studyinghistorical price movements, investors can make informed tradingdecisions. The following articles aim to give a thorough presentationof technical analysis tools and theories.
The primary tools of technical analysis are the charts. The articlesfirst introduced common kinds of charts available on charting software.Charts are also used to identify trending and ranging markets. Thearticles continued on how to identify support and resistance price,trend lines and price channels. Next, it presented simple tradingstrategies in trending and ranging markets.
Through careful observation, technical analysts have found recurringpatterns on the charts that can give us indication about future pricemovements. The articles introduced the important patterns, such as thetrend reversal and trend continuation patterns. In addition, theJapanese Candle Stick has its own implications in terms of patterns,the articles then introduced how to read the Japanese Candle stick andthe inference of its patterns.
Technical indicators are mathematical calculations based onhistorical prices, they are used extensively in technical analysis topredict changes in trends or price patterns. The final part of thetechnical analysis is a serious of articles introducing two major typesof indicators: trend following indicators and oscillators.