Principles Principles of Technical Analysis

Technical analysis in forex trading to learn about the effects of the pattern of price movements that have occurred to predict the direction of the next price movement. Traders are proficient and always use technical analysis called chartist or technicalist. A chartist tends to ignore the reasons or causes of price movements, and just focus on the result of the recent movement. Trading charts and technical indicators are needed to assist the analysis.

There are three underlying principles of technical analysis in forex trading , namely :

1 . The entire cause of the price movement has been declared in the pattern of price movements themselvesFactors influence the release of economic data , changing political circumstances , market sentiment and also change the amount of supply and demand has been reflected by the pattern of price movements in the trading chart . In predicting the direction of the market , a true chartist focus only on the current price movement patterns and changes in technical indicators , not on what will happen as a result of a particular news release .



2 . Prices always move to follow the trend with certain limitsOne important purpose of technical analysis is to determine the direction of the trend of the future price movements , both in the short , medium and long term . There are 3 state of the direction of the trend , the direction of price movement which would tend to fixed ( trend continuation ) , the direction of movement is likely to reverse direction ( trend reversal) and the movement tended to move back and forth within a certain price range ( sideways or ranging ) .Before applying certain technical indicators to determine the direction of the trend , chartist usually draw a line connecting the lowest prices or the highest prices , the so-called trend lines ( trend lines) . Besides the price movement trend will continue or reverse direction if it has been touched , or pass through ( penetrate ) the limits specified price called the support and resistance levels . Likewise, if the price moves sideways , break of support or resistance level suggests the occurrence of a state trending .To determine the limits of the price , chartist draw lines of support and resistance are believed to be the price levels that are consensus ( consensus ) of the market participants . In addition to levels of support and resistance , these boundaries are also a number of psychological or round number levels are often used as a reference for market participants .

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3 . Historical patterns of price movements will always be repeated ( History repeats itself )Chartist believe that the pattern of price movements in the past will be repeated and could happen again this time . The more often a pattern chart ( chart pattern ) occurs , the greater probability of truth . The pattern of price movements could also be a bar candlestick formations with different variations .Underlying theories of technical analysis in forexIn addition to trends , patterns and formations bar candlestick charts , technical analysis in forex is also based on :- Mathematical theory , as stated in the calculation of indicators such as moving averages or oscillators- The theory of numbers , such as Fibonacci retracement and Gann Numbers- The theory of waves , such as wave Elliot ( Elliot wave )- The theory of gap ( high, low , open , close)