Technical market analysts are indispensable in Forex markets today. Technical market analysis, which they perform, is based on the assumption that historical price action can be used to predict future price action, and with a dose of relative certainty. Another assumption is that the price action inconsistency is minimal – it lasts mere seconds, and yet even in those few seconds there is fortune to be made; this is especially true for the large traders who can afford computers monitoring everything. Because of that, people generally assume that every single thing has already been factored in, and they are not wrong – not by much, anyway.
The fundamental truth is that something can always be omitted, inadvertently. To technical market analysts, only trends are truly relevant, rather than the individual price changes.
Technical market analysts (including those specialized in Forex markets) write market commentaries on behalf of brokerages that employ them. Those Forex market commentaries are generally focused on currency markets and everything that might influence them; those are primarily political, social economic and other factors. Technical market analysts identify individual trends by analyzing historical performance of stocks.
One of the main duties of technical market analysts is to determine the direction of a certain trend (after it has been identified of course) or, if we are talking about range-bound trading, whether they are at the top or the bottom channel and where those two actually are. In order to achieve the desired result, technical market analysts turn to so-called “trendlines”. Trendlines can indicate the direction and speed of price, as well as any patterns of price contraction.
Technical market analysts also make heavy use of indicators such as MACD, stochastics, Fibonnaci retracement, moving averages and others, thus paving the way for the three basic types of analysis they perform:
In technical market analysis, technical market analysts utilize the historical performance of stocks to identify trends.
In fundamental analysis, technical market analysts investigate the economic aspects of currencies and their countries, in order to determine the overall economic health and growth prospects. Technical market analysts predict if any given country’s economy is going to prosper or fail in the foreseeable future. What technical market analysts call fundamentals are all factors related to business, yet low debt and an abundance of funds are considered to make an ideal fundamental background.
In quantitative analysis, technical market analysts investigate variables, assign them numerical values and use mathematics to understand and recreate future models. Discounted cash flow and option pricing are the main targets of a forex market quantitative analysis. However, for all their skill and technical expertise, the one thing technical market analysts cannot analyze is the human factor. A company’s management and its public image fall under qualitative analysis which, while not an actual science per se, also plays a role in any investor’s plans.
Unfortunately, qualitative analysis is a matter of insight rather than actual empirical data, and it is a quality of only the most successful investors out there.