New York London GMT Tokyo Sydney

Understanding Technical Analysis and How to make Money off It

The currency market can be analyzed in two essential ways, the fundamental and technical analysis: The fundamental analysis defines economic indicators that drive the price of currencies around the globe. Some of the data employed by this system includes employment rate, gross domestic product, trade balance, interest rate, etc.

On the other hand, technical analysis bases on historic price data, hence it looks at charts from the eyes of technical indicators that allows investors to identify trades in the market. There exist this long term talk about which of the two is better, but I can attest that knowing a bit of them both is great. Statistics show that more traders opt for technical analysis. This article attempts to try to explain how investors can apply technical analysis and translate its knowledge into money making.

Use few Technical Indicators: You’ll notice at this time that the use of various technical indicators on varying trading strategies is most proficient when few indicators are employed in determining trade directions. Plotting different technical indicators on you activity chart can become clumsy and might end up confusing you, making it pretty hard to make a definitive decision and you could as well stand the chance of losing a chunk of your investment.

Leading Indicator: Trading forex technical indicators shows that you’ll encounter more of lagging indicators to leading indicators and  as such, you might be faced with the problem of dealing with signals that have been triggered after the currency have witnessed the move. They basically lag and as such are not suitable for early trend detection. If you want to use technical indicators that are pretty much fast and reliable, then you should go for leading indicators. Leading indicators are effective in the currency market as they give early signals for entry/exit signals. Examples of leading indicators include MACD, Stochastic, RSI etc. The examples listed eventually are all oscillators.

The more data that you can have access to, the more your chances are in the market towards making informed decision in the marketplace. It has become pretty much easy to manage these huge volumes of statistical data due to the recent development that is seen in the development of currency trading software.

Technical indicators that are finely blended with an appropriate money management technique would yield consistent profits. At all times you should start on a demo account, especially if you’re a newbie.

About Alex

Connect with us on Google+

Comments are closed.