Technical Analysis In The Forex Markets

To trade forex online, we need to reorder the chaotic stream of information and data first, since, the raw list of numbers that would otherwise be appearing on our screens would only lead to confusion in trading decisions. The tools that make the study of the market action possible for the retail trader, are the tools of technical analysis. In spite of blanket condemnation from the academia, technical analysis is very popular among trader, and no study of the forex market action would be complete without discussion of the subject.

1.    Technical analysis is a tool for structuring one’s trading decisions

Technical analysis is often thought to possess great predictive powers, but in fact a significant body of research testifies for the opposite case. Indeed, the difficulty  of replicating the rare success stories of famous technical traders, and their own reticence about their methods implies that even those cases where some practitioners achieve great returns through TA are abnormalities that result from special circumstances unrelated to the merits of TA.

In contrast, technical analysis has greatest validity as a tool of ordering, and formalizing one’s analysis of the market.  By following certain principles, we have the advantage of arranging our trades in the context of a logical, easy-to analyze plan.

2.    It is not a tool of prognostication.

Technical analysis is universally dismissed as a predictive tool by academics, and disregarded by a majority of the professional trader community. Retail traders are also advised to at least reduce their dependence on the implications of technical configurations.

3.    Technical methods are best used to gain precision on trading opportunities as established by fundamental studies

The best practitioners of TA make use of it in combination with fundamental tools. By isolating potential opportunities with FA, a trader can make use of technical tools with far greater chances of success.

4.    TA will deliver best results combined with diligent application of money management strategies.

It is perhaps a good idea to delegate the final role in all trading decisions to money management principles. Recall that there’s no time that you can’t find an exploitable opportunity for trading the forex market. Choosing among these opportunities to isolate the ones that suit your plan, in the context of money management methods, is the best approach in trading.

Forex Broker Ratings can help a trader determine which of the many firms in the market are better suited to the particular analytical needs in mind. However, we strongly recommend personal testing of each trading platform before any decision about capital commitment is made. Not all forex brokers offer the same technical packages, so it’s a good idea to check the offers out with demo or mini accounts.
Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...
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