Technical Analysis is one of the most basic and one of the most accurate ways of trading the FOREX market known by the forex traders profession.
All available information on any particular currency at any given time, and its affect on traders, and the market, are already reflected in thecurrency’s price.
The foreign exchange market is mostly composed of trends and is, therefore, a place where technical analysis can be used very efficaciously. Experience in trading has shown that history repeats itself time and time again, hence certain chart patterns become very consistent, predictable and therefore can be very dependable.
The problem of course is being capable of spotting them in the first place. There’s always more than meets the eye at first glance
Prices move in trends; and the traders who don’t recognise this fact obviously have no need to apply a trading system based on technical analysis, they haven’t even begun to realise yet what is happening..
But, years of research has shown that those who trade consistently”with the trend”, will more often than not, greatly improve their chances of succeeding in the forex markets (i.e., making a lot more profitable trades).
By detecting the current trend, this will help you to become more aware of the overall market direction and thereby this will give you a better idea of when to jump in–especially when shorter-term price movements tend to jumble the immediiate picture.
The question you should be asking yourself by now is; how will technical analysis help you to determine what the trend of the market is, and how will it help your future efforts to trade with the trend and not go against the current trend?
It is crucial to realise that no one is saying that technical analysis is the crystal ball of trading expertise . And if you should ask, which technical indicators are better in Forex trading? The answer is none – technical indicators should merely be elements of your own customised, individualised trading system. They are exactly like the tools in a tool kit, not the kit itself!
As a Forex Technical Trader, your goals should be :-
#1) To work out the price action of the currency pair you have chosen to trade. Price is the basic concern. If the EUR/USD is at 1.3226 and goes to 1.3219, 1.3112, 1.3008 – the market is obviously in a down trend. Despite what every technical indicator might predict
If the trend is down, stay with the trend.Any Indicators that are showing where price will go next or what it should be doing are useless. You need only be concerned with what the market is doing right now, not what the market might do.
The price alone will tell you what the market is doing and which way it is heading.
#2) To forever remember that technical indicators are only giving you confirmations based on what the market is already telling you. So listen and pay very close attention to the market and let it dictate which method you will use and which tool you will pull out of your bag of systems and techniques.
For only by listening to the markets will you ever be able to trade it successfully and become a profitable trader.
Chris Strudwick is a successful share trader on the Australian Stock Market Visit his weblogs at both http://www.asxnewbie.com AND http://www.aussie-retiree.com/ for more free articles and useful information about the stock market.