What is so great about technical analysis?

Once a trader masters technical analysis, it is easy to apply it to any currency or time frame, and thus allowing a relatively short time to figure out where trends are going. Because of the short time, technicians can follow numerous currencies at the same time, whereas fundamentalists usually focus on one or two pairs of currencies, because there is so much information in the market to analyze.

Traders using fundamental analysis can run into trouble because there are so many different ways to analyze market information. This causes controversy and can lead to misdirection, misunderstanding and ultimately, loss of money. On the other hand, technical analysis can be much more straightforward. Many traders even consider it to be a self-fulfilling prophecy, meaning that it works well because so many traders use it. This is an important aspect of technical analysis because if many traders are basing their decisions on technical indicators, then the indicators must be watched since they reflect the sentiment of the market and the majority of the traders.

Why is the foreign exchange market the best market to use technical analysis?

The foundation behind using technical analysis is to find trends when they first develop, which allows the trader to ride the trend until it ends. The foreign exchange market is typically composed of trends and is, therefore, a place where technical analysis can be effective. Traders are able to speculate on both up and down trends in the foreign exchange market because it is possible to Ask a currency and Bid against another currency. This aspect of currency trading works well with technical analysis, because technical analysis helps determine where the trends are and which way they are going, thus giving the trader a chance of profiting from the market, regardless of its direction.

In comparison to the equities and futures markets, technical analysis is much more common and popular within the foreign exchange markets, which causes the traders to pay attention. The market partly moves because of all the technical analysis performed. For example, according to technical analysis, if a currency pair decrease, then the majority of traders will Bid the pair, causing it to drop further.