Forex: Trending Markets

Technical analysis statistically works better in markets characterized by cycles that repeat themselves. The reason for this is because the whole premise of technical analysis is based on the study of price movements. Historical price data is used to forecast the direction of future prices. In addition, technical analysis works better in liquid markets. Through technical analysis traders can identify general trends and capture key entry and exit points. Markets that are less liquid make it more difficult to accurately gauge entry and exit points.