Abstract: In actual foreign exchange trading platforms, technical analysis has always been controversial. Professionals including many mainstream foreign exchange analysts believe that technical analysis is indispensable in foreign exchange trading platforms.
In actual foreign exchange trading platforms, technical analysis has always been controversial. Professionals, including many mainstream foreign exchange analysts, believe that technical analysis is indispensable in foreign exchange trading platforms. However, some traders believe that technical analysis is possible.
First of all, we need to understand what technical analysis is. Technical analysis refers to an analysis method that explores specific laws based on past financial market price behaviors and applies mathematics and logic to determine possible future price trends—used in a foreign exchange trading platform, judging the future exchange rate level based on the past exchange rate level. The core idea is that the relationship between supply and demand determines the foreign exchange rate. The relationship between supply and demand reflects fundamentals, people's expectations, and various rational or irrational factors. Therefore, the relationship between supply and demand in the foreign exchange market is the only issue to be studied.
Experts once believed that the technical analysis of foreign exchange trading platforms is based on three main assumptions. The first is to assume that market behavior covers all information. The main idea is to believe that every factor that affects the exchange rate level is reflected in market behavior; the second is hypothesis The exchange rate moves along the trend, and its main idea is to believe that exchange rate changes occur according to specific laws; the third is to assume that history will repeat itself, and its main idea is to think that human psychology is bound to be restricted by specific laws. The first hypothesis affirms that studying market behavior itself means careful consideration of all factors that affect the exchange rate level and explains the rationality of technical analysis; the second and third hypotheses enable us to use technical analysis to find patterns and apply them practically in actual transactions in the foreign exchange market.
Technical analysis of foreign exchange trading platforms has always been a controversial area. Some people believe that market fluctuations or price changes are random. In this way, the so-called search for rules in technical analysis becomes meaningless. Even when some industry practitioners left the industry very sadly and angrily, they once growled: "Technical analysis is a lie!"
After some novice traders understand the market, they begin to try to learn technical analysis. However, even if traders start to use technical analysis to trade, losses still occur, and even more significant losses begin to appear. At this time, traders will have a considerable loss. Confusion, is the technical analysis unreliable? No, the trader has a wrong understanding of technical analysis. Some traders take the so-called technical analysis skills by heart and regard them as martial arts secrets. They think that as long as they practice carefully according to the skills described in the book, they will soon become a master trader, and the market will quickly become him—cash machine. However, in actual trading, the market is often changing rapidly. Traders are not expecting price fluctuations. The techniques in technical analysis are only suggestions for reference, not guidelines.
In the foreign exchange market, there are many technical analysis methods. What we have to do is not to master all the analysis methods and do not regard technical analysis as the holy grail of trading. Technical analysis is only a tool for our trading. The success of trading still depends on the trading rules: implementation and proper fund management.