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Many new forex traders go into the market with the idea that technical analysis done right like the text book tells them is just about the same as the holy grail. It is just what you do. Well I will tell you now, that you will most likely loose a significant amount of money if you do just that.

Firstly let us get something very straight. Technical Analysis is a backward looking analysis. The process involves analyzing events already gone. Now behavior being what it is means that past behavior generally sets some predictors. Lets say that again “Past behavior generally sets some predictors”. You got that. You see what you are saying is based on a historical perspective the mob rule of a lot of people doing things together makes likely behaviors to happen across the collective markets. These indicators give a feel for the markets direction of movement.

Scenario

The market has moved up to a threshold at which your technical analysis suggests a turn is imminent. The trader takes a sell as the next direction is down. Along comes the government and raises interest rates a bit unexpected and the market continues to rise. The indicators of you were reading them suggested that it might turn, but it also indicated that the forex traders had left the floor, no one was in the market on that pair, it was becoming relatively illiquid. Don’t be the brave one and go in, wait until the market sets the new direction.

There are some who believe that the currency pairs are pushed around by banks working as a collective. I know the banks have to move a lot of funds. They also have to at times find a lot to get a deal for a large corporation moving. Ever purchased some heavy equipment to start a mine. Those guys need a huge amount of a currency to fund the purchase of equipment. Not enough banks from around the world could collectively agree on exactly the currency movement that was to be produced. Therefore some banks will have to loose out if they are not part of the collective and what does one have to do to get in.

Scenario

A trader analyzes the market, the market is rising on this pair, it looks like a buy position. The thing that the trader hasn’t noticed is the dwindling volume in the market the trades are leaving the market on this one. Sorry it looks like you are approaching a peak in the market. The market may get news that continues its climb. It is also reaching a point where it might take a tumble.

Many new forex traders show who are using technical analysis overload their indicators. Don’t even bother! I keep it reasonably simple. I only use candlestick charts. I only use MACD and simple moving averages at 5 and 25 to analyze the market. Your mind may better understand other indicators. That is fine use them if you feel more comfortable. These are the ones I know and understand best.

So when your technical analysis of the forex markets shows that the MACD and your candlestick and moving averages comes out that you should buy on a currency pair. Stop take a breath, pause and ask yourself this. Is there a fundamental force that is telling you that the masses might just have it wrong on this occasion. Perhaps the technical analysis would be fine for Please do this for me before you trade it will help you stay ahead of the game.