Traders use technical analysis because it works. Technical analysis makes money for thousands of traders in the market. And for many of them, technical analysis is their main tool. Technical analysis looks at how currencies have performed in the past and uses math and statistical analysis to evaluate the future behavior of those currency prices.
There is no completely fail safe way to predict the currency market’s actions, but, because it uses factual evidence, technical analysis is thought to be more accurate than fundamental analysis. Technical analysis is the process of putting prince information for a currency into a computer. The computer then supplies the trader with information on what patterns have taken place over a period of time in the foreign exchange market. Forecasts are made based upon these patterns and how they match with current price movements.
Most veterans of the foreign exchange market tend to rely on fundamental analysis because that what they’ve become comfortable with. However, those new to the foreign exchange market are trained in technical analysis. Technical analysis is easy to follow and is based upon real data. Facts and statistics are easier to understand and interpret. It also offers an even playing field because of the consistency in the data that is produced from technical analysis.
Technical analysis is also easier to master than fundamental analysis. Fundamental analysis can require years of training and practice to be able to use and understand it properly. More and more young professionals are entering into the foreign exchange market so it is no surprise that technology is becoming more and more involved in the trading process. The younger generation of traders has embraced technical analysis easily because of its ease, its use of computer applications, and because it offers instant gratification and fulfillment.