Technical analysis tries to forecast future price movements by analzing past market data.

One of the basic principles of technical analysis is that historical price data predicts future price action.

Whereas the forex is a 24-hour market, there tends to be a signifcant amount of data that can be used to determine possible future price activity. This makes it an ideal market for traders that use technical tools, such as trends, charts and indicators.

There are three basic steps forming the basis of technical analysis:

1. Market action discounts everything! This means that the price is a reflection of all components that is known to affect the market. Some of the factors are: fundamentals, supply and demand, political pressure factors and market sentiment. Pure technical analysis is only concerned with up and down price movements, not with the reasons for those changes.

2. Prices move in trends. Technical analysis is used to calculate patterns of market behavior. That market behavior has been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. You should also be aware that there are patterns that repeat on a predictable basis.

3. History repeats itself. Forex Trading chart patterns have been recognized and categorized for over 100 years, and this leads to the conclusion that human psychology changes little over time. Since patterns have worked well in the past, it is assumed that they will not change in the future.

Technical analysis goal is to forecast price trends in future based on historical data along with the volume. Any private investor can access the technical analysis tools in order to compute his or her trading decisions. Technical analysis has been in use for centuries, that’s why its premises are based on the experience, prolonged observation and can be considered quite reliable.

Japan traders have been using candlestick techniques since in the 18th century, so, it is thought as the oldest one

Even fundamental traders will glance at a chart to see if they’re buying at a fair price, selling at a historical top or entering a sideways market.

Useful technical analysis tools

RSI (Relative Strength Index) - The RSI is a price-following oscillator that ranges between 0 and 100.

Chart patterns - Trend, Support, Resistance, Flag, Pennant, Wedge, Gap, Head and shoulders, Rectangle, Ascending triangle, Descending triangle, Symmetrical triangle, Breakout, Double top, Triple top, Double bottom, Triple bottom, Price channel, Rounding bottom, Rounding top.

Fibonacci - Interpretation of the Fibonacci numbers in technical analysis predicts changes in trends as prices approach lines created by Fibonacci studies. When used in technical analysis, the golden ratio is typically translated into three percentages: 38.2%, 50% and 61.8%.

Technical analysis is valuable because every possible bit of information is included in the price of a security, it is not necessary to analyze the fundamental, economic, political, etc. factors that might influence that price. Because all available information is already included in the current price, just a study of the price movement is required.

This is just a very basic introduction to Forex Technical Analysis. You should do much more reading before investing your hard earned money.

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First fatal psychological mistake.

Following blindly is the most Forex traders’ fatal psychological weakness. As new financial data is published, most Forex traders will rush to be first to enter the market. In such situation, most Forex traders seem fearless, not fearing making losses and only worry that others are making profit and worrying that they must enter or lose money.

There are many Forex traders who watch the Forex chart closely, and will enter a market when the chart show a steep movement. They don’t even take time to understand what are the forces causing movement. It may be too late when they finally realize that it is a false alarm because they are already in the losing position.

When it comes to trading, one of the most neglected important subjects are those dealing with trading psychology. Most traders spend lots of time trying to find that perfect system. But having a good operating system is just a small part of the game. It is very important to have a system that well suits the trader, but it is as important as having a money management plan, or to understand all the psychology barriers that will affect the trading decisions. In order to succeed in this business, there must be an equalness between all important aspects of trading.

When you lose a trade, what is the first thought that pops up in your mind? It would probably be, “There must be something wrong with my system”, or “I knew it, I shouldn’t have taken this trade”.

FOREX trading is pure volatility and 80% of all trades do not last more than 2-3 days. Most of them become daytrades. It is easy to accept that conditions can and will change in a heartbeat, rendering most trade plans obsolete.

One principle is about cutting your losses at an early stage. Some traders want to believe that their losses might do well after a lenghty waiting time. More than likely the market moves against these non-profitable positions and make them lose hundred of points. Even if they rise again they will be unprofitable. Do not be caught up in the thought that every trade should be profitable. If you can profit from half the number of your trades you are on the right track. If you would like to get even and profit if only half of your trades are winners is to allow your winners to run and to minimize your losses.

Another principle is playing smart by not letting your emotions rule in trading. Be objective with your decisions. While in the market,be sensitive enough to see the factors that may have influenced the changes that worked against the original analysis you had worked out.

Expect the unexpected,both good and bad. Understand these happings, be prepared, and take the appropriate actions. A good psychology plan takes into consideration that you can not predict what is going to happen in the market.

Unless you’re trading in short positions, only increase your position when prices goes up, not down. Generally, when a price starts to move it usually continues in that direction for a while.

How to Handle a Losing Streak:
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Don’t overtrade. If you are trading several currency markets and not having any success, cut back to trading one or two markets. Follow those fewer trades more closely and document your success or failures more easily. Plus, your trading account won’t be drawn down so quickly.If you trade less you may discover why you are not successful.

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Why is everyone so interested in learning how to trade FOREX?

Online Currency trading on the Foreign Exchange (FOREX) provides an very interesting wealth building investment vehicle for the average person.

FOREX education is free or cheap. Search Forex Trading on Google and you will see what I mean. Every day hundreds of people are discovering just how rewarding online currency trading can provide.

Successful FOREX traders have a lifestyle most people can only dream about.

You can learn the technical aspects off trading while you keep your day job. Once you have perfected your trading system you will have ample opportunity for your system to prove it will generate sufficient income before you to quit your day job.

Are you aware that 9 out of 10 traders lose money in the Forex market? That’s right, 90% of individual FX traders keep losing their hard-earned money in the market; while the rest of the 10% work freely at home.

As stated above the truth about Forex Trading is that most traders end up losing money.

Have you wondered why some 90% of investors lose and the rest are winners? Finely honed Forex trading skills and the individual system! Forex market is definitely not a game for the faint of heart and you need to sharpen your skills before investing.

Steps To Follow:

1. Formulate a program.

2. Test your program

3. Stick to your method for a set period of time/trades

Ideas You Must Adopt To Become a Profitable Trader

Trade in the direction of the trend

Start investing small amounts

How To Benefit From The Trend:

Identify what the trend is.
More profitable trades are made in the direction of the trend.
To get a better view of the market use multiple time frames.
Let the market tell you what it is doing. Know how to read the indictators
All major trends will have some retrenchment.
Don’t make it more complicated than it is.
You can hold your trades longer in a good trend.

Remember that these items can affect the Forex market:

Consumer Price Index (CPI)
Durable goods Orders
Employment Situation
Federal Open Market Committee (FOMC)
Federal Fund Rates
Global Domestic Product (GDP)
Housing Starts
Industrial Products
Inflation
International Trade Balance
Manufacturing Index
Personal Income
Purchasing Managers Index (PMI)
Producer Price Index (PPI)
Retail Sales
Unemployment Rate

Forex charts are not something that can be interpreted in a few minutes. The most successful traders will take time to fully evaluate and act upon the data that is presented.

Without this knowledge, you are very likely to fail in this very liquid active market.

Tips To Help You Succeed:

Trade with a stop loss

Trust your program

Follow your rules and stick with your program.

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