The principle belief of technical analysis is that the histories of price actions predict future actions. There are huge amounts of data that traders can use to measure future price activity due to the fact that the forex market is open 24 hours through online currency trading.
In Forex, Technical Analysis Discounts everything
Minimal Rate Inconsistency
At the end of the day, the flow and trend of capital is what matters most. Forex technical analysis is relied upon by traders as it surmises that all price influencing factors in the market have already been taken into account – political, social, psychological and economic. That’s why any small discrepancies between price ranges doesn’t usually last.
Trend or Range
Technical traders determine trends by drawing trend lines to see the history of rates, what causes the rise and fall. This is the goal of technical forex traders, to know if a currency pair will maintain its trend or move to another direction.
Great trend characteristics have been found with major currency pairs – USD/JPY, EUR/USD, GBP/USD and USD/CHF; while currency crosses are more likely to turn range-bound. Traders should have deeper understanding of trends and ranges as it dictates what strategy to use and what pairs to trade.
There are various indicators that technical traders use to determine the direction of future exchange rates.