How To Start Trading The Forex Market? (Part 8)

HOW TO predict the Future ?

by studying the Past (Technical Analysis):

1) The best traders don't discount one or the other but understand that
having an understanding how the fundamentals influence market sentiment
gives him/her an edge over those traders who don't.

2) In my opinion, TECHNICAL analysis is the easiest and most accurate way of
trading the FOREX market.

3) "The number's don't lie" - all available information and its impact on
the market, are already reflected in a currency's price.

4) Prices move in trends - the foreign exchange market is mostly composed of
trends and therefore a place where technical analysis can be very effective.

5) History repeats itself - over time, certain chart patterns become
consistent, predictable and very reliable. The question is SEEING them.

PRICES MOVE IN TRENDS

The traders who don't believe this obviously have no need to implement a
trading methodology on technical analysis. But, research has shown that
those who trade "with the trend", greatly improve their changes of making a
profitable trade.

Finding the prevailing trend will help you become aware of the overall
market direction and offer you better visibility,especially when
shorter-term movements tend to clutter the picture.

HOW does technical analysis help to determine what the trend is and HOW to
trade with then trend versus against it?

Even though, you learn you how to use and read various technical indicators
to identify a long- term trend, spot predictable chart patters and use
certain rules to enter and exit a high-probability trade, and even though a
ll this involves sound logic, parameters, methods, formulas, data, and
research, these technical indicators, by themselves, are not the Holy Grail
of FOREX trading.

It takes discipline and emotional control to stick with trading following
through the inevitable market ups and downs. Keep in mind, good technical
traders expect ups and downs.

Which technical indicators are the BEST?

NONE - technical indicators should simply be components of your overall
customized, personalized trading system, and not a stand alone system.
The objectives as a FOREX Technical Trader are:

1) To figure out the price action of the currency pair. Price is the main
concern. If the EUR/USD is at 1.2224 and goes to 1.2020, 1.1980, 1.1940- the
market is in a down trend.

Despite what every technical indicator might predict, if the trend is down,
stay with the trend. Indicators showing where price will go next or what it
should be doing are useless.

A trader should only be concerned with what the market is doing, not what
the market might do. The price tells you what the market is doing.

2) Always remember that technical indicators are only giving you
confirmations based on what the market is telling you. So listen to the
market and let it tell you which method, strategy or techniques you should
use.

About The Author: Veteran Trader Martin Maier is the Founder of
http://www.fenixcapitalmanagement.com .He is the developer of various
futures and commodities trading programs and has received many Trading
Awards.