The Technician Approach to FOREX
The Technician's CreedAll market fundamentals are depicted in the actual market data, so the actual market fundamentals need not be studied in detail.
The technician believes prices have memory -- that past prices do influence future prices. If you get in a market, you have to get out. History repeats itself, and therefore markets move in fairly predictable, or at least quantifiable, patterns. These patterns, generated by price movement, are the raw buy and sell signals. The goal in technical analysis is to uncover the signals exhibited in a current market by examining past market signals.
Prices move in trends.
The Technician's CaveatNever make a trading decision based solely on a single indicator or chart pattern. The eclectic approach of comparing several indicators and charts at the same time is the best strategy. Try to move from the most general conditions of a market to the most specific. Sift your technical tools finer and finer until they result in a trade.
Tip: As you develop your own trading method, find one charting technique or indicator for the most general forecast of the market and then find others to sift, refine, or filter that primary tool.
As in all other aspects of trading, be disciplined when using technical analysis. Too often, a trader fails to sell or buy into a market even after it has reached a price that his technical studies have identified as an entry or exit point. This is money management and psychology, not technical analysis, and both are very important.
By Michael Duane Archer