Best Technical Analysis - the Best Methods for Big Consistent Profits

So what is the best technical analysis? There are numerous methods and theories you can use and here we will separate out the best technical analysis theories and indicators which you can use for bigger profits. 

There are two mistakes most novice traders make and here they are if you want to win avoid them!

Markets Move to a Scientific Theory

No they don't and its obvious why - if they did we would all know where prices are going in advance and there would be no market! Markets move on uncertainty and that's a fact. 

There are theories that claim to be scientific but are nothing of the sort and they include - The theories of W D Gann, Elliot and his Wave Theory and the Fibonacci number sequence, avoid them or lose. 

Forex trading involves trading the odds and you wont win every trade, but you can make big profits. 

The More Inputs the Better 

Today, we have super fast computers and complex software programs and many traders are under the impression, that the more complicated the method and the more inputs and technical indicators they use, the better - this is simply not true. 

If it were, in the last 50 years with all the advances in technology we have seen, far more traders would win then they did 50 years ago - but they don't. 

The reason for this is - simple trading systems work best, as they have fewer elements to break and are more robust. 

The best forex technical analysis is simple and if you want to succeed, you need to make sure your system is simple too. 

How to Use Technical Analysis 

Keep in mind that technical analysis has many advantages but it is NOT a science, it's an art. 

Your aim is the spot and act on high odds trading scenarios. 

Forget about trying to pick market tops and bottoms and trade the reality of price change only and look to confirm price momentum is on your side. 

In my view, the best technical trading systems use breakout methodology. 

It's a fact that most major trends start and continue from new market highs. If you can lock into these breaks and confirm them with momentum oscillators, you can make a lot of money. 

The next article in this series on best technical analysis, will focus on building a simple, robust and profitable long term breakout system for profit.

Forex Technical Analysis for a Better Consideration of the Psychology

For its part, the technical analysis from a financial rather simple principle: at a time T, the course of a title accurately reflects all available information on such, its entire history. This is because time is continuous, any variation of the course leading to the identification of a new level, which itself will be the base for new variations. Therefore, it is possible to be based on prices at different levels to try to determine the future most likely. 

However, this determination of meaning and magnitude of change is not easy. Indeed, it is fast enough that the psychological effects (eg related to the effects of thresholds or the behavior of individuals in relation to trade) can be just as important as purely technical considerations. Therefore may appear different opinions on the basis of similar information yet. It is on this same principle itself that the determination is based courses, which reflect a consensus among market positions and short positions. 

Technical analysis does not therefore, as such, to determine specific reasons for the change of course but rather to measure the evolution of them and, if possible, to determine their likely future behavior. 

This approach allows to take greater account of the psychology of traders. 

Indeed, the movement of rising and falling markets are almost always based on trends, more or less long term. These are based on the approach of investors in securities, pessimistic (bear) or optimistic (bull). The situation is characterized by optimism over the ever-rising even as the fundamentals do not justify the increase. The ratios are increasing, which may lead analysts to withdraw securities.

However, it is often during these trends increase as individuals gradually convinced of the value of positioning itself to buy, while the upside potential is much diminished. This observation reflects the herding effect of the market and hence the interest to be among the first beneficiaries of the movements.

Forex Technical Analysis - Symmetrical Triangles Use Them Correctly for Huge Profits!

If you want to use forex technical analysis and base your forex trading strategy on forex charts then you need reliable chart patterns to trade and they don't come much better than the symmetrical triangle which if traded correctly can give you some great high odds trades and big profits... 

As with all chart formation the symmetrical triangle is rooted in investor psychology, so lets look at how and why they form. 

Why a Symmetrical Triangle Forms 

Symmetrical triangles can be seen as areas of indecision in the market as it pauses and future direction is uncertain. 

Typically, the forces of supply and demand at that the time the triangle is forming are considered nearly equal. Attempts to push the currency higher are quickly met by selling into the rally, on the other hand dips are seen as good value and see buying. 

Each new lower top and higher bottom becomes more shallow than the last, which gives the symmetrical triangle is distinctive shape. 

Eventually, this indecision gives way to action as market sentiment breaks out or in many cases explodes out of this formation. 

They normally feature low volatility before a breakout and low volatility when followed by high volatility means the market has decided where to push prices. 

They very often form before major events such as economic reports where traders are waiting to see the outcome of the report and how it will affect prices. They can form before important geo- political events as well and are very much a wait and see formation"

A Continuation Pattern

Research has shown that symmetrical triangles normally resolve themselves in the direction of the trend. This means the pattern is normally classed as a continuation pattern. 

Taking the Move

Its always best to wait for the break from the triangle and not try and predict the move in advance - wait for confirmation and use a momentum indicator to time your trade. We love using the stochastic indicator ( discussed in our other articles) and looking for an up turn in momentum to accompany the move. 

We find that the narrower the triangle becomes and the longer it takes to form the better the signal will tend to be. 

If you are suing forex charts then you really should look to trade symmetrical triangles, there a great reliable formation and when prices break you can get some high odds trades and great forex profits.

If you want to learn forex technical analysis then make symmetrical triangles, an essential part of your 

Forex Technical Analysis – 6 Simple Tips for Bigger Profits

Using forex technical analysis can and does help traders make big profits however you have to know how to use it correctly, to achieve currency trading success and that’s what this article is all about. 

Let’s look at six tips to make your forex technical analysis successful.



1. Trade Valid Data 

Using technical analysis on forex charts is designed to get the odds in your favour and to trade the odds you need meaningful data. Do NOT day trade – day traders never win as all short term volatility is random.

Either swing trade look for trades that last a week or long term trend follow. 

2. Use Weekly and daily charts 

Don’t just use daily charts - use the weekly chart as well to spot the major trends – remember in currency trading currency trends follow economic cycles and these can last for several years and they are apparent on the weekly chart. 

You can then use the daily chart to time your trading signals and entry and exit points.

3. Understand Support and Resistance 

All successful forex traders need to understand support and resistance and you want to look for valid levels – These are levels that have been tested several times ( at least 3 ) and preferably in two different time frames.

Try and trade these valid levels and again start with the weekly chart first and see if they line up with the daily levels – these are the very best set ups.

4. Understand Breakout Methodology 

While support and resistance can hold they can obviously break as well and it’s a fact that many of the major trends in forex trading take place form new market highs NOT market lows.

Many forex traders hate buying new highs as they feel they have missed a bit of the move – while this is true these trends simply accelerate away and you should grit your teeth and enter. 

5. Use Momentum to your advantage 

So will support or resistance break or hold? You don’t know and you should never predict or hope you should use momentum indicators. 

Whenever you enter a trade your view should always be supported by price momentum. Two of the best indicators are the stochastic and Relative Strength

Index. They will help you time your trades better get the odds on your side and help you make bigger profits.

Never make the major mistake that most traders do in forex technical analysis of trying to trade without momentum if you do you will lose. 

6. Keep it simple

Your system should be simple – simple systems work best as they have less elements to break and are more robust in real time trading.

You can trade successfully and make a lot of money just basing your system on the tools we have outlined above. 

6. Be Patient and be disciplined 

Be patient don’t trade for the sake of trading. 

Only execute treading signals that your forex technical analysis system generates and don’t lose discipline and chase losses or try and hurry profits.

When you have entered a trade maintain discipline and make sure you place a stop and have a realistic target. 

Our view of forex technical analysis may strike you as simplistic and it is but after trading for 25 years and trying just about every method out there we have found the above works and makes us money and maybe it can help you to.

Forex Trading - What is Technical Analysis?

Simply put, technical analysis means that one studies price movement. You can use price charts in order to keep track of price movement history. By doing so, you can try to figure out which way prices will go, up or down, in future trends.

Most online forex brokers give you many different tools that will help you figure out what it is that will assist you in technical analysis. Some of these include the following:

Bollinger Bands

Bollinger Bands measure market volatility. They use three lines of data: an average that changes in the middle; an upper line, which keeps track of the changing average and then adds two standard deviations; and a lower line, which keeps track of the changing average, and subtracts two standard deviations.

If the market is particularly volatile, the bands appear further apart. If volatility is not so great, the bands appear closer together.

One phenomenon known as the "Bollinger Bounce" means that the middle band is "controlled" by the two outer bands. When the middle band nears either of the two outer bands, it is "bounced" back towards the middle. This helps you visually keep track of the market, and it's useful because if the middle band does approach either the upper or lower band, you know it's likely that it will be pushed back towards the middle. It's best to use this as a strategy if prices are changing rapidly but you see no clear trends from your data.

Another way to spot a general trend is what is called the "Bollinger Squeeze." When the bands squeeze close together, it might mean that a breakout is going to happen pretty soon. If the middle band "breaks through" or exceeds either the upper or lower band, it's likely that the market will continue to trend in that direction.

Another indicator is called the "Parabolic SAR," or "Parabolic Stop and Reversal." This indicator spots trend reversals. It is perhaps the easiest indicator to read. Points or dots are placed in the chart in positions that are either above or below the "candles." (There is thea formula used that regulates where the points appear on the chart, but it's too in depth to describe here.) If points appear above the candles, traders should sell. If points appear below the candles, traders should buy.

Parabolic SAR works best if there are clear downward or upward trends. However, it does not work very well when price movement is minimal.

Another indicator is called "stochastics." Stochastics measures conditions that have been overbought or oversold in the market. The scale ranges from 0 to 100. If stochastics' lines are above 80, this means that the market has been overbought and a downward trend may soon be coming. If stochastics lines go below 20, it may mean that the market has been oversold and an upward trend is about to occur.

Stochastics can help you if you want to determine when you should lock in profits or when you should place an order to buy or sell. However, don't just rely on one of these indicators. Use several of them and adjust your trading strategy according to what you see.


Article Source: http://www.forexprakashrai.blogspot.com/

Forex Technical Analysis

Forex trading is an essential part of today’s international economy. Basically, it is trading in multiple currencies. Not an easy task. The purpose of foreign exchange trading is to minimize risks due to changes in the market and close business deals in a profitable manner.

The forex market itself if dynamic – ever changing, subject to the whims of the market place and often changes in the political climate. Large amounts of foreign currency are actively traded. The potential for great gain is there. That means, though, the downside risk for loss is equally great. The whole method of trading can be complicated. There is no room for crystal balls or guess work.

What anyone who intends to be involved in forex trading needs to understand is underlying assumptions of forex technical analysis. There are three primary assumptions.

First, is the assumption that there is a pattern in trades of a foreign currency. Individuals don’t change their thought patterns quickly and in a short period of time. Thought patterns and points of view repeat themselves. Forex technical analysis looks for the patterns in past behavior and trades In order to be able to apply these patterns to the future.

A second assumption is that the market itself will discount everything. For example, assume there are major crop failures and the threat of drought is real. The market will price this into the currencies. The market coldly and objectively takes everything that happens and adjusts its prices accordingly.

A major corporation goes bankrupt? A major financial figure makes a prediction? A war breaks out? These occurrences are quickly priced into the market. Forex technical analysis looks for these discounts in order to avoid discounting the market a second time.

A third assumption is that there are trends within the patterns. Forex technical analysis watches these movements in price and uses the trends to forecast the future.

While these three assumptions are important to understand, there are also several indicators that are calculated to support forex technical analysis. Every trader has their favorite. The basic technical indicator that anyone considering forex trading needs to understand is the concept of the” Moving Average”.

The calculation of a moving average is done using a specific number of data points that move forward. For example, a 3 day moving average is the average of a price on days 1, 2 and 3. That’s the first calculation. The next calculation is for days 2, 3 and 4. The next is days 3, 4 and 5. A moving average can be calculated using any defined interval.

Why is this important? When a moving average trend line is graphed over the individual
movements in price, much of the volatility in the price is smoothed out and the trend is easier to see. This average is always behind what is happening in the market and is known as a trend follower. There are other variations of a moving average that someone involved in forex technical analysis follows.

If you are interested in forex trading and forex technical analysis, these three basic assumptions and the concept of a moving average are very important ideas upon which to build a base for understanding foreign exchange trading and doing so profitably.

There are plenty of Forex Technical Analysis Assistants out there. They are normally built into the Forex Trading Automated Software. Below is the most famous one at the moment:

FOREX Technical Analysis

Technical Analysis is probably the most common and successful method of making trading decisions and analyzing forex and commodities markets. 

Technical analysis differs from fundamental analysis in that technical analysis is applied only to the price action of the market, ignoring fundamental factors. As fundamental data can often provide only a long-term or "delayed" forecast of exchange rate movements, technical analysis has become the primary tool with which to successfully trade shorter-term price movements, and to set stop loss and profit targets.

Technical analysis consists primarily of a variety of technical studies, each of which can be interpreted to generate buy and sell decisions or to predict market direction. 

Support and Resistance Levels 

One use of technical analysis, apart from technical studies, is in deriving "support" and "resistance" levels. The concept here is that the market will tend to trade above its support levels and trade below its resistance levels. If a support or resistance level is broken, the market is then expected to follow through in that direction. These levels are determined by analyzing the chart and assessing where the market has encountered unbroken support or resistance in the past. 

Popular Technical Analysis Tools 

Moving Averages (MA): Indicators used to smooth price fluctuations and identify trends. The most basic type of moving average, the simple moving average, is the average of the past x bars ending with the current bar;

Moving Average Convergence Divergence (MACD): Indicator that utilizes moving averages to identify possible trends and an oscillator to determine when a trend is overbought or oversold;

Bollinger Bands: Bands that are placed x moving average standard deviations above and below a simple MA line;

Fibonacci Retracement Levels: Indicator used to identify potential levels of support and resistance;

Directional Movement Index (DMI): A positive line (+DI) measuring buying and a negative line (-DI) measuring selling pressure;

Relative Strength Index (RSI): Momentum oscillator that is plotted on a vertical scale from 0 to 100;

How to do analysis of free Forex technical analysis

analysis is divided into two types: Fundamental and Technical. Fundamental analysis attempts to predict movements in currencies by examining current political and economic events. Technical analysis uses historical economic data to predict movements in the FOREX. These two articles will examine the principles of technical analysis and the tools involved.

Basic Analysis Principles

Technical analysis is based on three assumptions:

1 – Price movements are a result of all market forces combined. Things that can affect currency prices include political events, economic conditions, supply and demand, seasonal variations and weather conditions. The technical analyst, however, is not concerned with the reasons for market movement, but rather, the movements themselves.

2 – Currency prices follow trends. Many market patterns have been recognized as having predictable consequences.

3 – Price movements follow historical trends. FOREX data has been collected for over 100 years and patterns have emerged over time. These patterns are based on human psychology and the way people react to certain sets of circumstances.

Is Technical Analysis Necessary?

Most FOREX day traders rely heavily on technical analysis and may use fundamental analysis to support their trading strategy. A major advantage of technical over fundamental analysis is that it can be applied to many different markets and currencies at the same time. Fundamental analysis requires in-depth knowledge of the political and economic conditions of a certain country; therefore it is less likely that any one trader can do proper fundamental analyses on more than a few countries.

The beginner trader may be put off by the seeming complexity of technical analysis and wonder if it is necessary for FOREX trading. As with any investment, FOREX trading requires a strategy. Although any strategy is possible, technical analysis is a proven method for predicting movements in the FOREX. Does that mean it's a sure thing? Nothing is 100% certain, and currency prices are affected by a variety of forces. This is why many traders use a combination of technical and fundamental analysis to plot their trading strategies.

Availability of charts

Every FOREX online broker should provide access to a wide variety of charts for technical analysis. Some charting software is available free of charge while in-depth professional charts may carry a monthly fee. Charts can be viewed by various time scales and provide detailed information about price movements as well analytical overlays. Charts can be zoomed in to the tick level or zoomed out to see the broad picture over a period of months or years. Charts are updated in real time.

FOREX charts may be available on your broker's web site or may be included as part of their trading software.

Before beginning in FOREX trading it is a good idea to become accustomed to market behaviour by following charts for a period of time and studying their movements and learning about trends. Many brokers provide practice accounts that can be used by beginners to place 'paper' bids – no real money is exchanged. These practice accounts familiarize the beginning trader with FOREX trading charts and market movement while at the same time allowing him to become acquainted with the trading software a particular broker uses.