Forex Technical Analysis - Basics You Need to Know

Forex technical analysis is the most effective and most time efficient way to make money in forex and studying forex charts can lead you to success but you need to know some basics avoid common forex myths and do it correctly and that's what this article is all about.

Let's look at some key points to consider when getting your forex trading strategy together and suing forex technical analysis.

History Repeats Itself

Human psychology is constant and forex chart patterns repeat themselves over time but you need to understand one key point - they don't do so with scientific accuracy.

There is a huge market for courses who say they can but they can't - so don't fall for this myth. Forex trading is a game of odds not certainties.

If you can learn to trade the odds, you can have more winners than losers, execute your trading system at the right time and enjoy currency trading success.

Forex charts also make studying the news irrelevant.

Many traders simply believe newswires and brokers and the arguments and opinions are convincing but that's all they are - opinions and there more often than not wrong.

Trading the Reality

While the fundamentals are important, it's very hard to judge their impact and how the participants view them. Forex technical analysis simply assumes that all fundamentals will show up quickly in price action.

The forex chartist therefore doesn't concern himself with why prices are moving - he simply trades the reality of price change and wants to make profits by locking into and holding trends when they occur.

Keep It Simple

The best forex trading systems are simple and easy to understand.

A complicated trading system is unlikely to be successful.

Why?

Because if you make it to simple there will be too many elements to break.

Be Objective

Ignore subjective tools and make your system rule based this means that you will stay objective and hold your discipline. Most people don't fail in forex trading because they have poor methods - they fail because they have poor discipline.

If you don't have the discipline to follow your system you have no system - period.

The basis of any good forex technical trading system is built on the following

1. Using support and resistance

This lines up areas that are important in terms of the market and you can look for them either to hold or break.

2. Confirmation

You cannot predict if levels will hold or break so don't try.

You need to get confirmation that they do by a clear break or an indication of a change in price direction away from the level in the opposite direction to show they hold.

For this you need to learn to use confirming leading indicators - we don't have time to go through them here, simply look up momentum oscillators in our other articles.

3. Money management