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Foreign Exchange: The Complete Deal by James Sharpe

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7. Predicting the Future: Technical Analysis and FX Forecasting

Technical analysis and the foreign exchange markets

Technical analysis is the study of price movements, primarily through charts, for the purpose of forecasting future price movements. Its predictive qualities are based on three premises:

  1. The price contains all known information.
  2. Prices move in trends.
  3. History repeats itself.

Technical analysis has been around for many years but the rapid advances and availability of computer power have been responsible for growth in popularity of the approach in recent years. The ability to collect and retrieve vast amounts of data has been crucial to transforming this once fringe activity to mainstream participation.

The notion ...

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