The main objective behind technical analysis is to identify trends when they get initialized, develop and decline. The trader to capitalizes on the trend until it switches direction. The reason why technical analysis plays such an important part in the Forex market is because the Forex market is based on trends. Trend is the nature of the forex market
Due to the nature of the Forex market, traders are able to trade on both sides of the market that is on the buying and selling side. The Technical analysis is most effective in helping traders predict the movements of the trends. In part, the market movements and trends are predicted by technical indicators and forex patterns.
However, due to the fact that the majority of the traders are relying on the same technical indicators to predict the price movements, the market movements may also become a self fulfilling prophecy. Thus, if technical analysis predicts that the price of a currency pair will decline, because the majority of the traders are acting in response to their analysis, this will result in the price declining further.
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