FOREX analysis is divided into two types: Fundamental and Technical. Fundamental analysis attempts to predict movements in currencies by examining current political and economic events. FOREX technical analysis uses historical economic data to predict movements in the FOREX.
Basic Principles
Technical analysis is based on three assumptions:
1 – Price movements are a result of all market forces combined. Things that can affect currency prices include political events, economic conditions, supply and demand, seasonal variations and weather conditions. The technical analyst, however, is not concerned with the reasons for market movement, but rather, the movements themselves.
2 – Currency prices follow trends. Many market patterns have been recognized as having predictable consequences.
3 – Price movements follow historical trends. FOREX data has been collected for over 100 years and patterns have emerged over time. These patterns are based on human psychology and the way people react to certain sets of circumstances.
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