Why Technical Analysis ?

The answer to that question is quite simple. Technical analysis works, but not because of the rationale that some people accept as true. The reality is that there are thousands of traders who over and over again make money in the markets who are using technical analysis as their prime tool. It’s not that technical analysis is the Holy Grail or that it is a so called ‘voodoo’ science. Technical analysis is math and statistical based. It looks at the historic performance of currencies and uses modern technology to analyze the future behaviour of prices.

Technical analysis is believed to be more accurate than fundamental analysis because it is supported by cold, hard facts but in the end, there's no 100% fail safe way to foretell the currency market's actions. Technical analysts input past price information into a computer which then supplies data on the patterns that have taken place in over a century of forex trading. These patterns are evaluated with real time price movements and forecasts are made.

Today the young guns of forex trading get the benefits of intense training session and advisers to learn how to execute complex technical analysis. The very knowledgeable veterans keep on to relying on fundamental analysis because they're comfortable with it and quite honestly why stray off a proven path.

Another rationale behind the fact that the majority of forex traders utilize technical analysis is because it's real and easy to follow. It offers facts and statistics, not data that can be interpreted in any way you want. That means it allows traders to benefit from consistency in the data they use and it produces a fairly even playing field.

Technical analysis is simpler to master than fundamental analysis which requires years of practice to understand fully. Also taking into account the arrival of young professionals into the realm of forex trading, it's not hard to comprehend why technology are so greatly involved. Brought up on a staple food of computers and technology, instant fulfilment and easy acquirement of knowledge, the computer age group has engaged technical analysis with delight.

If you are like many newbie forex traders you will have a little success and a lot of losses. Don’t give up just yet. Forex trading is not something you can rush into without any education. Take your time to learn the ropes and get yourself a mentor, someone you trust who is a professional trader. What are the things you have to learn? Well first and foremost it is technical analysis and charting.

The most liquidity in the forex market is from the big international banks and very experienced institutional investors. Don’t even think about taking these goliaths of the forex trading world on, you will be eaten alive. Learn to swim beside them and catch the same waves they do. The successful traders don’t have any magic formulas or secret indicators that no-one else has. They are using simple proven techniques through technical analysis and using the same indicators that you should be learning.

To make money in the forex market you must focus on the indicators and understand what the indicators are telling you so that you can make trades that make you money. Use the most common indicators that successful traders use. The most common tools that good traders use are Forex Fibonacci retracement, Pivot points, price channels, MACD, and RSI as well as closely following fundamentals. However, it’s not just because the tools work that traders who use them are successful, they know how the market behaves around the charts and can identify entry and exit signals. The way to become successful is to pick the tools that suit your trading style and stick with them.

Another important thing is to have a trading plan. In other words treat each trade as a piece of business. Calculate your risks and have a goal as to how many pips profit you are going to make on the trade. Many novice forex traders make a plan but they don’t follow it because they suddenly see what they think is a good opportunity and without thinking through risk and return, how much capital to trade, or where their entry and exit points should be, they arbitrarily choose a chunk of capital and then wonder why the trade was unsuccessful. Once you have made a plan through your technical analysis and charting skills, you should then trade the plan.