Forex charting and technical
analysis is a great way to make money, the problem is - many traders make
common mistakes and lose. Let's look at the ones you need to avoid.
1. Don't Predict
The most common mistake of all is to
try and predict where prices may go.
If you get involved in prediction
you are simply hoping or guessing and this is not going to work in any venture.
Don't predict - you should only act
on confirmation of price changes and this always means trading with price
momentum on your side - when applying your forex trading strategy
.
2. Confirmation
Rather than trying to predict -
confirm price momentum and the odds of success will increase dramatically.
What you need to do is see a level
tested or broken and take a trading signal with price momentum ALWAYS going the
way that your trading signal indicates.
Wait and see the price change FIRST
on your forex chart don't simply guess!
This way you are trading with price
strength on your side and the odds will be to.
If you don't know about momentum
oscillators - its time to learn about them.
Good ones to start with are: the
stochastic, Relative Strength Index (RSI) and Average Directional Movement
(ADX) - There are others but this is a good place to start.
3. Being to Complicated
Many traders think 10 indicators
must be better than 2 but this is not true. The simpler your forex trading
system is the better it will work
Why?
Because simple systems are more
robust than complicated ones in the brutal world of trading and have fewer
elements to break. All the top traders use essentially simple currency trading
systems and you should to.
4. Using Time Frames That Don't Work
Forex day trading! If you try it you
will lose don't make this fatal error. All volatility you see within daily time
frames on forex charts is random; you can never get the odds in your favour and
will never win.
Stick to longer term trend following
or swing trading - when using your forex charts.
You can get the odds on your side
and that's what you need to do to achieve currency trading success.
5. Using Indicators That Don't Work
There are plenty of these and most
of these are routed in the belief that you can predict forex prices. Good
examples are:
Elliot wave Gann angles and
Fibonacci numbers. Stick with logical indicators.
Another error linked to the above is
using indicators for entering trades which are lagging indicators (such as
buying dips to moving averages) or using volatility indicators to generate
trading signals (Bollinger bands) both are great indicators but you should
NEVER generate trading signals from them alone.
6. Being to Subjective
Many traders like to be subjective
and that fine - but make sure your entry is governed by objective indicators to
execute trading signals.
If you are too subjective and start
using cycles and other indicators that cause you to think to much you will
lose.
Why?
Because your emotions get involved
and this means staying away from news stories they really will confuse you and
hurt your discipline.
7. Forex charts and volatility
Them major problem for most traders
who use forex technical analysis or forex charts is they have no understanding
of how to deal with volatility from a entry, or stop point of view.
We don't have enough room to cover
it here but you must understand standard deviation of price and build a forex
trading strategy to combat it.
Volatility is the big enemy, when it
comes to forex trading and you must learn to deal with it. Get reading and make
an understanding of it part of your forex education.
FINALLY!
Keep in mind when you are using
forex charts and learning forex trading, that you are involved in a game of
odds - NOT certainties.
Your aim is always to keep the odds
on your side, protect what you have and run your profits.
If you can avoid the above mistakes,
you can build a forex trading strategy to help you make big profits from your
analysis of forex charts - good luck!
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