Wednesday, December 23, 2009

Technical analysis of forex trading

If you are a forex trader and you hear the phrase "technical analysis," what is it that you think? If you instantly think about a chart that is completely filled with indicators such as stochastics, MACD, etc, then you probably have a different definition of technical analysis than I do.

When you use all those indicators, what exactly are you analyzing? To me, it would seem like all the indicators are doing all the "analyzing". The trader is just basing his/her decision whether to buy or sell based on the indicators. If you are going to use technical analysis, then shouldn't YOU be the one that should be analyzing how to trade the market, instead of your trusted indicators???

This is why trading price action is so important if you are going to get into technical analysis. You have to be able to grasp concepts like price movement, and be able to create a trading plan off of it. This may be more subjective than some traders are probably used to. But subjectiveness is something that almost any successful trader uses.

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