Is Technical Analysis Necessary To The FOREX Trader?
To tell the truth, most FOREX traders DO rely heavily on technical
analysis and may also use fundamental analysis to support their trading strategies.
A major advantage technical analysis has 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 particular
political and economic conditions of a certain country; therefore it is
a bit less likely that any one trader can do proper fundamental analyses on
more than a few countries.
The novice trader may be put off by the apparent complexity of technical analysis
and wonder if it is really necessary for FOREX trading.
As with any investment, sensible currency trading requires a viable FOREX strategy.
are possible, technical analysis is a proven method for predicting
movements in the FOREX.
that mean it's a perfect predictor of
Well, we all
know that nothing is 100% certain, and currency prices will remain
by a variety of forces no matter what technical knowledge and analysis
may predict. This is the reason many traders use a
combination of technical and fundamental analysis to plot their trading
of Charts for the FOREX Trader
A online FOREX broker
should provide access to a wide variety of charts
for technical analysis. While some charting software is available free
of charge, in-depth professional charts may carry a monthly fee. Charts
can be viewed by various time scales and should provide detailed
information about price movements as well analytical overlays. Good
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 should be, and
generally are, updated in real time. Yesterday's figures may be good
for some information, but you will usually want the most up-to-date
may be available as a service on your broker's web site or may be
included as part of their FOREX
trading software package.
beginning in FOREX trading it is a good idea to become accustomed to
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 demo, or practice
accounts, familiarize the beginning trader with FOREX charts and market
movement while at the same time allowing him to become acquainted with
the trading software a particular broker uses.
Part 2 of this article will look at
the various kinds of charts and technical indicators which may be available.