2Bull Forex Blog

Many traders don’t understand how and why forex technical analysis works and base there trading systems on wrong assumptions and lose. Here we will show the advantages of forex charts and how you can make big profits from them.

1. The Equation for Market Movement

The equation is simple

Market Fundamentals + Human perception of = Price.

Its humans that decide the price of anything and that includes currency prices.

As human nature is constant this is reflected in chart patterns which repeat and repeat again. The fundamental news is not important by itself, its how it is perceived that determines the course of events.

Forex technical analysis simply assumes all the fundamentals will quickly show up in price action and more importantly, the forex charts will tell you how all the traders have perceived them.

You are viewing the truth on a forex chart no guessing or predicting is needed, you are seeing the reality of the market price.

2. Forex Trend Following

Forex prices move in trends up or down and as the currency markets reflect the health of the economy they represent, these trends can last for weeks, months or even years.

A forex chartist doesn’t care how or why prices are moving, they simply want to lock into these trends and make money from them.

3. A Game of Odds Not Certainties

Many people think prices move to some mysterious scientific theory – but they don’t and there is no way of predicting where prices will go. If of course there were a scientific theory of forex market movement, we would all know the price in advance and there would be no market!

When you trade forex you are simply trading the odds – but don’t let that put you off, you can make a lot of money. You’re like a good poker player who passes hands by, folds losing ones and hits the big paying high odds hands.

Your trade is your hand and you should be patient, to wait for the right opportunities and not be afraid to fold or pass a trade by, until you get the right opportunity.

4. Best Time Frames

The best time frames are the big trends which last for weeks and months and the overbought / oversold areas within the trend which, last for few days to a week.

Never day trade! This is huge mistake made by many traders. All short term volatility is random and you will never win so don’t try it.

You can however swing trade or long term trend follow, it’s a matter of choice which method you choose – both work.

5. Choosing Your Indicators

Start by using support and resistance lines and learn a breakout methodology, its timeless and it works and is covered in our other articles. Then, just add a few indicators to help you confirm your trades and your all set.

Forex technical analysis can make you a lot of money if used correctly and this means

- Acting on the reality of price change not predicting
- Using simple robust rule based system
- Being patent and only trading high odds trades
- Controlling losses with rigid money management.

When using forex technical analysis, you have a time efficient way to seek huge profits from the markets and if you can get yourself a simple rule based system which trades the reality of price change and locks into and holds trends, you can make outstanding gains.

Here we will give you three simple steps to making money with forex charts. Anyone can learn forex charting and it represents a time efficient and profitable way of trading.

Here we are going to look at charting the longer term trends that yield the big profits and these trends can last for week’s months or years and can be very profitable.

Avoid trading low odds trades in short time frames and day trading ( the most popular method for novices) is compete waste of time, as you can never get the odds in your favour.

Be patient and wait for the high odds trades and they can’t be forced and don’t come around everyday.

Right, let’s look at forex charting for beginners and how to pile up some big profits quickly, with a simple robust system.

Step 1 – Getting a Robust Forex Trading System

The first think you need to do is construct a simple trading system and it only needs to be a few indicators, combined with support and resistance.

Simple systems work best. There more robust than complicated ones and have fewer elements to break in the brutal, hard world, of real trading.

Start with a breakout system. This is buying new market highs – it’s a fact that most major forex moves start from new market highs NOT market lows.

A breakout should be past at least 2 x tests of resistance and the more the better and wider they are apart the better too.

Most traders hate breakout trading that’s why its so effective – they want to wait for the pullback – but they wait in vain as the price accelerates away and their not in.

Step 2 – Confirming the Trade

Once you have a breakout you need to confirm that price velocity and momentum is going to carry prices forward and here you need to learn about leading momentum indicators.

We have covered these fully in our other articles and they will help you put the odds on your side.

Step 3 – Money Management

With breakout trading money management is simple – your stop goes just below the breakout point and as the trend unfolds you need to lock in profit but be careful!

Most traders make the mistake of locking in profit to quickly and your forex trading strategy must give the market room to breathe. Don’t aim for perfection or trying to second guess the market; act on the reality of price change and trail your stop way behind normal market volatility.

You must learn to do the above and be disciplined or you will never make any real money.

Putting it all Together

The above sounds simple and it is. In fact, anyone can learn to trade forex the hard part is applying your method with discipline. You need to take losses and calculated profits when your charts tell you and ride the trends with discipline.

The method above works and will continue to work as it’s based on sound logic and your challenge to acquire the discipline to apply it to make big forex profits.