Posted by strudy on May 22nd, 2009

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.

2 Comments to “Forex Technical Analysis: The Art of Fortelling the Future by Looking at the Past”

1. on 29 Jul 2009 at 9:15 pm1Amit Cohen

   Interesting.
   I’d like to read more about the subject.
   Keep me updated.
   Thanks,
   Amit.

2. on 05 Aug 2009 at 3:46 pm2strudy

   Hi Amit,
   Thanks for your welcome comment. If you want more information on Forex ,feel free to go to our Forex section on http://www.asxnewbie.com . You will find a wealth of information there.

   Regards,

   Strudy