Here we are going to give an introduction to using forex technical analysis and using forex charts for bigger profits. Forex technical analysis if done correctly is the best and most time efficient way of seeking profits and should be considered as part of any forex trading strategy.
The first point to keep in mind is:
Forex technical analysis is a game of odds not of certainties, so forget about predicting with scientific accuracy, no one can achieve that – but if you understand the following equation, you can make big forex profits:
Fundamentals + Investor Psychology = Price
It is a fact that the fundamentals have an influence on price – all investors have the facts at their disposal but they see them in their own way and this mass of millions of people determines forex prices.
Investor psychology
Human psychology is constant and never changes.
Traders will always be influenced by emotion and these emotions of greed and fear, will push prices to far away from fair value and these price spikes are easy to see on forex charts.
The important point to keep in mind is that investor psychology repeats – and so do chart patterns.
Seeing the Whole Picture
Another very important point to keep in mind with forex technical analysis is that it studies the fundamentals.
All it does is simply assume that in today’s world of instant communications, they show up straight way in price action.
Studying forex charts however does something more:
It studies how investors perceive the fundamentals.
Its is not enough to simply look at the facts, as we all draw our own conclusions from what we see and emotions ensure that investors don’t act logically – they push prices to far ( either up or down) based upon their emotions.
Studying forex charts gives you the whole picture – it reflects the fundamentals and more importantly, how investors perceive them.
When using forex charts you don’t care how and why prices move, you simply look at the reality of price and try and make profits from the moves.
It sounds simple as a concept and it is – but it’s extremely powerful and if you incorporate it in your forex trading system, you can make big profits by trading when the odds are on your side.
Forex Technical Analysis Is Time Efficient
Using forex technical analysis is time efficient, you are studying price and don’t need to make assumptions of where they may go based upon the news – you can see the price as it is and simply trade the truth.
Many traders continually look at news and try and trade off it – but this is hard – the fundamentals are discounted instantly and you have very little chance of winning. Furthermore, if you look at the opinion of others your emotions get involved and any trader who lets emotions dictate their forex trading strategy, is destined to lose
Trading forex charts lets you see the reality as it is – no opinions or guessing and that gives you a huge advantage when trading for profits.
Forex Charting is An Art
Of course, all people use forex charts in different ways and it’s an art not a science.
It is similar to being a ships captain – use your charts correctly and you can get from A – B safely and earn a living; use your charts in the wrong way and you will hit the rocks and drown.
There are many myths perpetrated about using forex charts and if fall victim to them and you will lose.
The good news is anyone can become a successful forex chartist and if you follow basic rules, you can trade with the odds on your side and execute your forex trading signals correctly and win.
In part 2 of this article on forex technical analysis, we will look at basics points to incorporate into your forex trading plan, to be successful and look at common myths regarding forex charts you need to avoid.