The FX market is the perfect market for technical analysis. Long-term movements in the currency market generally correlate with economic cycles Economic cycles tend to repeat themselves and therefore can be predicted with a fair degree of accuracy Repetition is the key to technical analysis, since the entire premise of technical analysis lies in using historical price movement to forecast future price movement. In the stock market, the fundamentals of a particular company can change radically in a short period of time, making historical prices irrelevant in the prediction of future movement Technical analysis, which relies strongly on statistical assessments of market conditions, benefits greatly from the fact that the FX market is more normalized - meaning it is less skewed - than other financial markets The equities and futures markets, which are more skewed than the FX market, offer less statistical reliability; their distribution is less normalized, and hence the market is not as likely to retrace back when a statistical indicator suggests that a particular asset is overbought or oversold As a result, other markets are not as conducive to technical analysis.
Currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. Over 80% of volume is speculative in nature as a result, the market frequently overshoots and then corrects itself A technically trained trader can easily identify new trends and breakouts, which provide multiple opportunities to enter and exit positions. Charts and indicators are used by all professional FX market traders and candle charts are available on most charting packages In addition, the most commonly used indicators such as Fibonacci Retracements. Stochastics, MACD. Moving Averages. RSI and support/resistance levels have proven valid in many instances. In the NZD/USD chart below, it is clear that Fibonacci Retracements. Moving Averages and Stochastics have at one point or another given successful trading signals For example, the 62% retracement level has served as support for the NZD/USD from the beginning of September 2002 to the end of September 2002
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