Technical Analysis: Introduction

Technical analysis is the use of past price action and volume information to predict future price movements. Though there are exceptions to this, as a general rule, longer term investors tend to base their trading decisions on fundamentals and shorter term traders tend to focus more on technical. Technical analysts use charts and other tools to identify patterns that can suggest future activity.

From observation, active traders tend to focus more on technical than fundamentals, they still have an understanding of fundamentals and some consider fundamental factors in their trading decisions along with their technically based analysis। There is much debate as to which method is better as there are successful investors and traders who focus only on fundamentals (a great example being warren buffet) just as there are those who are successful and focus only on technical (a great example being Richard Dennis).

To become a successful Forex Trader,you will need to know how to effectively use both technical and fundamental analysis. In other words you will need to think like a fundamentalist and trade like a technician. It is important you understand that fundamental drives the market, but the market is technical.

Forex Education Training

Since what is traded in foreign exchange market (Forex) is money i.e. currencies. Currencies are traded through brokers or dealers, and are traded in pairs; example the Euro dollar and the US dollar (EUR/USD) or US dollar and Japanese Yen (USD/JPY). This kind trading can be confusing because you are not buying anything physical, hence the need for Forex Education Training. A well trained Forex trader will earn big profits on a regular basis while a poorly trained Forex trader will earn big losses as well. Forex trading is a business and for any business to be successful the need for adequate training cannot be over emphasized. Both seasoned and beginning Forex traders need Forex Education Training.

Trading the foreign exchange market (Forex) includes a lot of disciplines such as; technical analysis, fundamental analysis, sentiment analysis and trading psychology. Each of these disciplines covers different topics that should be studied individually.

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WHY TRADE FOREIGN EXCHANGE?

The foreign exchange market (currency, forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system until 1971.
Presently, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.[2] Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.[3]
The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollars, Euros, Japanese yen, Pounds Sterling, etc., and the need for trading in such currencies.

Market size and liquidity
The foreign exchange market is unique because of
· its trading volumes,
· the extreme liquidity of the market,
· its geographical dispersion,
· its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
· the variety of factors that affect exchange rates.
· the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
· the use of leverage