Here we are going to look at technical analysis and how it can help you make big profits trading forex markets.

Here we are going to show you the logic and how you can use technical analysis to get you a trading edge to earn consistent profits. 

The most common query in regard to technical analysis is: 

How can it possibly help you trade when the fundamental supply and demand equation is not known? 

The answer is it takes into account all the supply and demand fundamentals. 

How?

Technical analysis works on the basis that the fundamentals are instantly discounted in the price ( and if you think about it this is perfectly logical in today’s world of instant communications ) and all fundamentals immediately show up in price action. 

But technical analysis does something more: 

The price of anything ( including currencies ) is not just a reflection of the supply and demand fundamentals, it is a reflection of how people view them. 

Human psychology ultimately determines the price of anything. 

So, the equation for the determination of price is: 

Supply and demand + human psychology = Price

Recurring price patterns 

Human nature is constant and this is reflected in recurring price patterns in the market that can be traded for profit. 

By studying charts and a whole host of technical indicators traders can determine the odds of where prices will go next. 

In essence technical analysis in directly studies the fundamentals and human psychology. 

Most short term price spikes are caused by emotion - Not the supply and demand fundamentals and these are easy to spot using technical analysis. 

Technical analysis is an art not a science. 

You need to practice your art, however if used correctly, it can help you put the odds in your favor and help you spot trading opportunities. 

Currency markets are ideal for technical analysis as they exhibit long term trends either up or down in price. 

By locking into these trends you can trade them for profit and as the major trends can last for months these profits can be huge. 

In part 2 of this article we will go through how to use technical analysis correctly to profit from these long term trends.