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Technical Analysis is the easiest and most precise way to trade the FOREX market known to the community of forex traders. All available information about any currency and its impact on traders and the market is already reflected in the price of a currency. The foreign exchange market consists mostly of trends and is therefore a place where technical analysis can be used very effectively. Experience in trading has shown that history repeats itself – over time certain chart patterns become consistent, predictable, and very reliable. The problem is to be able to spot them. There is always more than meets the eye at first glance.
Prices move in trends; and it is obvious that traders who do not know this fact do not need to apply a trading methodology on technical analysis, they have not even realized it yet. However, over 100 years of research have shown that those who trade “with the trend” greatly increase their chances of winning (i.e. making a profitable trade) in the forex markets.
Most of the time, finding the prevailing trend will help you become aware of the overall market direction and give you better visibility – especially when shorter-term movements tend to clutter the picture. And more often than not, following the trend will save you from a not-so-good entry point in the beginning.
The main question you might be asking yourself right now is; how does technical analysis help you identify what the market’s trend is, and how does it aid your efforts to trade with the trend rather than against it?
It is important to note that no one is claiming technical analysis as the “magic bullet” of trading. And if you ask, which indicators are better in Forex trading? The answer is none – technical indicators should be components of your overall customized/personalized trading system, not systems in their own right. They are like tools in a tool kit, not the kit itself!)
As a Forex Technical Trader, your goals are:
#1) Understanding the price action of the currency pair. Price is the main concern. If EUR/USD is at 1.3226 and goes to 1.3219, 1.3112, 1.3008 – the market is bearish. Despite what every technical indicator can predict, if the trend is down, stay with the trend. Indicators that show where the price will go next or what it should do are useless. A trader only needs to be interested in what the market is doing, not what the market can do. Price tells you what the market is doing.
#2) Always remember that technical indicators only give you confirmation based on what the market is telling you. So listen to the market and pay close attention and let it dictate which method you will use and which tool you will take out of your strategy and technical bag. Because only by listening to the markets can you successfully conquer them and become a profitable trader.
