Translated from Russian by Google Translate
2 Сентябрь 2009

School of currency dealing. Technical analysis

Technical analysis is one of the most effective tools for forecasting developments in the foreign exchange market. The essence of technical analysis is the assumption that the current price action is a repetition of historical data. That is to say that history repeats itself. The essence of the trade on the basis of this type of analysis of the Forex is to conduct mathematical calculations and the construction of geometric figures that explain what is happening in the market. These geometrical figures can be: reversal patterns and continuation of the trend, the figures on which it can be concluded that it would be a breakthrough, etc.


But it is important to understand that the important thing is not how are those or other shapes. Sometimes I see that some indicators just called in another and pass them off as brand new, various books, which describe the same indicators, but from a different angle viewing. But the essence remains the same. The main task of a trader - it is income. This is the ultimate goal, which are all, regardless of their actions: either the book release, or simply trade the currency market.

Yield and consistency - these are the two components that form the basis of success. Therefore, no matter how called indicators, it is important one - the result. A positive result requires a balanced approach to business, demanding and trading discipline.

At any given time forex trading all the traders are divided into two parts: those who buy the currency and those who sell it. When the market outweighs the demand, that is more currency buyers than sellers, the price of the currency begins to rise. Accordingly, when supply exceeds demand, ie, most of the participants of the currency market to sell the currency, the price falls. Your task in this case - to join the majority and go with them in the same direction. But here it is important to remember that the majority is not determined by the number of participants, and the number of funds for each party. Technical analysis involves determining the volume of use for the indicator Volume.

When you spend technical analysis forex, then remember one rule - the simpler the trading system, the more effective. The rule guided by many traders, and therefore in some cases, simply to determine the course of their thoughts. For example, a properly constructed line support, which are located at strong levels, in most cases guarantee that the price would alienate them and go in the opposite direction. I say all this to the fact that we should not try to invent something of their own. It is much easier to learn to use already existing tools. If you invent any indicator forex, it is unlikely to work unless it is well known. The only exception is that an indicator which will be based on an existing indicator, which is distributed worldwide.

In general, the dilemma of technical analysis is based on two components. Someone thinks that the price movement in the currency market is really explained by constructing complex geometric shapes projected onto the price chart, as someone who feels that technical analysis Forex works for the simple reason that most people think so. I am inclined to follow the second option.

An experienced trader, with whom I once had occasion to talk, said that in the majority of countries in the world teaching methodology is similar to technical analysis. All traders receive the same program and all these lines of support and resistance, moving averages, etc. - All methods of teaching the construction of these elements the same, whether in Russia or Jamaica. It is for this reason, the absolute majority of traders operate similarly. Perhaps you will have your own opinion on this subject, but one way or another, and technical analysis works and works effectively. Without its use the FX market turns into a roulette.

Benefits forex technical analysis

This type of analysis, despite the apparent complexity, is actually quite simple to understand and most newcomers are traded on it. Some technical models, such as support and resistance lines, or different shapes, as a rule, easily digested and used in trade with greater effect than, for example, the basis of fundamental analysis. The thing is the simplicity of the visual perception of many elements of technical analysis. This, in turn, if correctly applied gives beginners a chance to quickly adapt and make a profit, gaining an additional impetus to further trade, but also instills confidence in his abilities.

Disadvantages technical analysis forex

Most traders learn forex technical analysis books, attend online seminars, and ultimately decide for themselves that this kind of analysis - what they need. But the problem is that, realizing a model, the trader believes that he has found a wonderful elixir, which is suitable for all, without exception, the market situation and what lies ahead for him only winning trades. In short, gradually from under his feet began to leave the bulwark of reality. Encouraged by this success, the trader begins to apply this technique wherever possible, believing that the concepts of the model is perfect. But the problem is that some models are very difficult to interpret in real time.

Where to enter, where to go from the market? These questions inevitably confronting the trader, but to get answers to them is not easy. As a result, the trader loses some of their money and begins to take its use of indicator Forex ineffective. Then he learns that there is, it turns out, even such an indicator as, for example, MACD. With a new wave of enthusiasm, the trader continues to trade using the new indicator, but the result is the same - a loss. Next comes frustration, and self-confidence is greatly reduced.

Then trader hears that you can effectively trade on the stock market. He goes there, but again loses. Then he buys an expensive software and once again losing money. Then he learns that you can effectively trade on the 15-minute chart by scalping. Try this, and again loses. And so it goes on. The trader thinks that he understands the technical analysis of Forex, but it is actually quite the opposite.

From my point of view, there are two problems. The first - an unwillingness to understand the reason for the failure to use the trade indicator and instead to make proper conclusions on the future and continue to use the current indicator, he is looking for something new. Second - lack of embedding technical analysis trading strategy. Details of the second problem I discuss in my next article.