In a short time period, Forex trading has become very popular among investors and even common people looking for a mode of investment to earn handsome profits. It has even overtaken stock markets of the world in terms of total turnover. For a newcomer, it can be an overwhelming situation looking at the prices of the currencies pairs with fluctuations taking place every now and then. This is why there is a trend of learning from the past and making predictions on the basis of the past movements of these currencies. This is called technical analysis of the past movements and trends in pairs of currencies to make a prediction about their future movement.
Most Investors Use Technical Analysis to Make Their Moves
There are many methods of technical analysis of the past results but all of them are used to predict future behavior of a currency relative to another currency. Analysis of the past movement of the currency falls into two broad categories. If the price has been moving in a single direction and according to a set pattern, trend lines become the tool to predict the future movement of the currency and the level to which it will go up or down. Resistance and support lines are more useful to predict future movement of the currency if the past movement is such that the currency is going up and touching a level and then coming back to the lower level. You can easily predict the direction in which the currency would move in such a situation.
There are times and situations when you can make a prediction based upon your knowledge of the past movement of a currency. However, you cannot be certain about the movement of the currency or the level it will go just on the basis of a technical analysis. However, technical analysis remains one of the oldest ways to study the past results in the currency markets and is very helpful for the investors in the sense they can take a look at the charts to know they are buying the currency at a fair price.