Let me first address the basic premises on which technical analysis is based. Technical analysis remains the same irrespective of the markets you apply to. Here are some basic assumptions underlying technical analysis.

· Prices are constantly reacting to news and information flows. Due to the constant flow of information and the actions of traders and arbitrageurs, the prices of equities, commodities and currencies are constantly reacting to such news flows. In other words, prices are in a constant state of evolution and discovery.

· The most important assumption of technical analysis is that past patterns tend to repeat themselves in the future too. Hence the best way to predict future patterns in price is to study the past price patterns, understand the underlying trend and extrapolate to the future. For this, the understanding of past patterns is very important.

· The market is a sum of combined intelligence of traders and investors who operarte in the short and long end of the market. It is also the combined intelligence of long traders and short sellers. Markets as a summation are smarter and better informed than any individual trader. Hence the best way to trade is to understand these patterns, apply the right pattern and extrapolate the same. The basic idea of technical analysis is to accept the trend as your friend and not try to outsmart the market.

· Generally price movements are not organized or systematic. Price movements are random hence it is tough for one person to identify outliers. It is best to trade within the ambit of such trends and that is where technical analysis really comes in handy.

Since trading in forex, equities, equity futures and commodities, all adhere to most of these principles you can safely apply technicals to forex trading. It begins with deconstructing the pattern underlying the trend and then extrapolating it.