This article gives you a complete guide to currency technical analysis. We explain why it works, and show you how you can use technical analysis in the currency markets, to make huge profits.
Many traders don’t fully understand the advantages of technical analysis – and scoff at it, saying that it can’t work.
We will however, show you how to use currency technical analysis the right way, to make big profits – so let’s get started.
What is Currency Technical Analysis?
It is simply defined as the study of price action through the use of charts – for the purpose of identifying price trends. It’s not a science, as many chartists claim – it’s an art, and it works! Why? Because technical analysis reflects human psychology. What about the supply and demand fundamentals, you may ask – well it takes them into account too.
Currency technical analysis uses the following equation:
Market Perception (trader psychology) + Fundamentals = Price Action
All currency technical analysis does, is postulate that all fundamentals are quickly reflected in price action (and in the 21st century with our advanced communications this is truer than ever) – so it simply concentrates on price action. It really is that simple!
Price action reflects all the fundamentals, and more importantly, how the participants perceive them.
Traders who study fundamentals claim that you can’t use technical analysis – because you need to know and study the fundamentals, to know where prices are going – this is simply not true! Some of the largest price moves in history, have occurred with little or no change in the fundamentals.
It’s a fact that markets are generally most bullish at market tops and most bearish at market bottoms – and these markets occurred with little or no change in the fundamentals. Human psychology was at work here – and currency technical analysis studies this, as well as fundamentals.
Learn to use technical analysis, and you will see the reality as it is – rather than listening to the opinions of others. Keep in mind that 90% of traders lose money – because they’re influenced by greed and fear created by the news services.
Charts allow you to see the reality – and that’s a huge advantage.
Currency technical analysis makes the following assumptions:
1. Markets Discount
All fundamentals show up quickly in the price action, when you use technical analysis. You are therefore studying the fundamentals as they are – not trying to guess their impact – and of course, you’re studying human psychology as well.
2. Trends Persist
Currency technical analysis can prove this – just get out a chart of any currency, and you’ll see long term trends – many lasting for several years.
The basis of currency technical analysis, is that what has happened in the past, will happen again – and that’s why it’s so effective.
Human behaviour repeats itself – and since price patterns reflect shifts in human psychology, we can assume that certain patterns and trends will repeat themselves.
Your aim is to use technical analysis to catch, and hold the longer-term trends. Keep in mind that human behaviour does repeat itself – but humans can be unpredictable as well!
Keep in mind that technical analysis is an art, not a science. Be wary of theories that say they can predict with scientific accuracy – they can’t! – If they could, we’d all know the price in advance – and there’d be no market.
The good news is that by using technical analysis in the money markets, you can get the odds on your favour – and make big long-term profits.
Trade the Odds with Currency Technical Analysis
In gambling, the aim is to get the odds in your favour – and in trading, your aim should be to trade only when the odds are in your favour. You won’t win every trade – but neither can the top football players score from every kick at the goal.
By following the information outlined here, and putting in a little work and preparation, you could soon be racking up huge long-term profits by using currency technical analysis.