If you look at any Forex table, you will see trends. If you use your technical analysis as the cornerstone of your Forex trading strategy, you can identify these trends and trade to make big profits.
There are many misconceptions about the use of Forex charts, so here we will explain how it works and give some tips for using technical analysis for greater currency gains.
What is technical analysis?
In essence, it is a study of price activity to identify trends – to identify repetitive graphic patterns that can be sold for profit.
FOREX graphic patterns repeat themselves – because they reflect a stable human psychology.
Many traders think that just learning Forex charts may not work – because supply and demand are not taken into account – but it works.
A simple equation will explain why.
Market perception (trader psychology) + Basics (supply and demand) = Price
Price movements reflect all the basics – the most important thing is how participants perceive them.
In today’s fast-paced world of communication, fundamentals are immediately apparent in price action – so technical analysis simply assumes that all known fundamentals are immediately visible in price action.
Some of the biggest price movements in history have occurred with little or no change in fundamental changes.
These price movements stemmed from human psychology, and currency technical analysis is capable of studying this. This gives you a huge advantage – the people who set the price for everything when you accept it.
The right price is the market price – so you see the reality rather than listening to the opinions of others.
Let’s look at three hypotheses based on technical analysis – currency technical analysis makes the following assumptions:
1. Discount in the markets
As we have explained, all the basics are quickly visible in the price. So you see the effect of the basics, and you see how people perceive them at the same time.
2. Sustainable trends
You get great trends in currency trading. It is enough to look at any currency table, long-term trends – weeks, months or years.
History repeats itself
The basis of technical analysis of currency is the recurrence of what happened in the past – because human psychology never changes.
Because chart patterns reflect changes in human psychology, certain patterns and tendencies will be repeated over and over again.
However, keep in mind that tables are an art, not a science.
Even if human behavior is repetitive, people can also be unpredictable – so you are trading by betting, not by certainty.
The good news is that by using technical analysis of currencies, you can make bets in your favor and make big profits in the long run.
Now let’s look at some tips for using technical analysis for greater profit:
1. Focus on longer-term trends
Currencies tend to reflect the basic health of the economy. This creates longer-term trends that last for months or years – so focus on long-term trends rather than short-term “market noise”.
2. Use a simple system
If you want to develop an effective Forex trading system, simplify – you need support and resistance and a few confirming indicators.
In online currency trading, it is a fact that simple systems work better – in a real and ruthless trading world because there are fewer elements to break.
3. Isolated trade
This is a key factor you should learn as part of your Forex trading education.
Don’t be influenced by other people’s opinions or news – you’ll hear convincing stories, but that’s it – and remember that journalists are not merchants!
If you follow the news or mix your emotions, you will join the company of the majority of traders – losers!
4. Be patient and disciplined
Don’t trade all the time – only trade when the system generates trading signals, and then trade with discipline.
A simple way to make big online profits
Using Forex charts the right way can be very lucrative – because they represent the most efficient and powerful way to make the most of your time in online Forex trading.