Hello there! In my effort to learn more about FX/Trading, I cam across this article and quoted it from investopedia.com. I hope this helps for those who are beginners like me:
Here are some points to remember about technical analysis:
Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, past prices and volume.
The advantage of using a bar chart over a straight line graph is that it shows the high, low, open and close for each particular day.
One of the most basic and easy to use technical analysis indicators is the moving average, which shows the average value of a security's price over a period of time. The most commonly used moving averages are 20-, 30-, 50-, 100- and 200-day.
Support and resistance levels are price levels at which movement should stop and reverse direction. Think of support/resistance (S/R) as levels that act as a floor or a ceiling to future price movements.
There are literally hundreds of different price patterns and indicators out there.
Technical analysis is a terrific tool, but it is much more effective when combined with fundamental analysis.
The way I understand is that technical analysis is the usual way of spotting possibilities from trends and patterns, of statistics from the market in the past. For me, this is an effective way and it is widely used by most traders (even gamblers follow patterns).