Technical analysis in Forex Trading

Besides Fundamental analysis, Technical Analysis is also common used in forex trading. In fact, a combined of Fundamental and Technical analysis is always encourage to get the optimum plots on your investment plan.

Comparing with Fundamental, Technical Analysis, is a completely different story. Instead of reviewing on the fundamental issues, traders from the technical side take an effort to forecast price movements by analyzing market data such as historical price trends, volumes, open interest, etc. Technical analysis is conducted based on the principal of 'history repeats itself', it does not result in absolute predictions about the future.

Instead, indicators generated by technical analysis will help investors anticipate what is "likely" to happen to prices over time.

Technical Indicators in Forex
Unlike fundamentals, technical trading relies heavily on graphs and charts. Practically, a technical trader will need at least one charting software to read and plot the related charts for his own references. Ever heard of Japanese candle stick? Fibonacci numbers? Relative Strength Index? Moving averages? Pivot points? Elliot Wave? These are some of the charting method that FX traders like to use during trades.

List of major technical indicators in trading.
· Simple Moving Average (SMA)
· Relative Strength Index (RSI)
· Moving Average Convergence/Divergemce (MACD)
· Parabolic SAR
· Fibonacci Numbers

Limitations on Technical Tradings
Technical analysis looks secure with proven tracks in the past times, however, trading Forex purely based on Technical Indicators would be extremely unsafe as we all knew thatt 'future does not equal to the past'.
A lot of unexpected variables are not considered in Technical Analysis: change of country leaders, change of government, natural disasters, change of bank policies, investor’s mood, war, or even terrorism attacks migh affect the currency value dramatically. These incidents are most likely not happening in the past thus Technical Analysis is not effective enough to predict the price movement.

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