The importance of the technical analysis while scalping the Forex market

On January 11, 2011 | By | In scalping tools

Technical analysis is a method to predict the future movements of the market by studding what happened in the past using charts. It is concerned with what has actually happened in the market rather than what should happen. The main tool is to create charts with data from the past price of the instruments and the volume of trading.

The technical analysis is focused in three primary premises:

  • It is concerned only with price movements and doesn’t care about the reason of the changes.
  • Prices move in trends. The technical analysis is focused on the common patterns of the market behavior trough which future results can be predicted.
  • History repeats itself. Forex chart patterns have been identified and analyzed for over 100 years leaving the conclusion that patterns which worked well in the past will also work in the future.

The main advantages of the technical analysis are that it can be used to project movements of any asset available for trade, its capacity to focus in the present and future, the price movements as the most important element and the possibility to detect the end of a trend before it becomes real in the market.

Instead of it, the main disadvantages are the problem of the Dow approach (as prices are not random) and the critics about the late appearance of the trend changes.

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