Using forex technical analysis can and does help traders make big profits however you have to know how to use it correctly, to achieve currency trading success and that’s what this article is all about.

Technical analysis is becoming an increasingly popular approach to trading, thanks in part to the advancement in charting packages and trading platforms. However, for a novice trader, understanding technical analysis – and how it can help predict trends in the market - can be daunting and challenging.

Technical analysis is the study of price movements in a market, whereby traders make use of historic chart patterns and indicators to predict future trends in the market. It is a visual representation of the past and present performance of a market and allows the trader to use this information in the form of price action, indicators and patterns to guide and inform future trends before entering a trade.

With technical analysis, traders analyse the historical prices and market statistics of an asset to determine where this asset is going next.

Charts are the best way to visualise past prices and recognise patterns, which can give hints about future price movements if the situation repeats itself.

Here are some tips, how you can improve your technical analysis skill:

1. Every indicator works.

Indicators are effective in identifying both buying opportunities and warnings for when you should get out and sell. The technical analysis world has devised dozens of indicators, and you can’t hope to use them all. There is no single best indicator, but there are a few best indicators for you. The best indicators for you are the ones whose inner workings you understand and the ones you are comfortable trusting because they perform well consistently and reliably for you.

2. Don’t Rely Too Much On One Type Of Indicator

There are literally thousands of technical indicators that exist, but they can generally be grouped into a four main categories: volume, momentum, trend, and volatility.

Knowing how each of these types of indicators differ is a little like knowing how the stocks in your long-term portfolio differ. Just like in your portfolio, you want to be diversified in your analysis. Leaning heavily on a volume indicator is ok; leaning heavily on four different volume indicators is not. It would be redundant, and only complicate your trading.

3. Multi-time Frame or Just a Single Time Frame?

There can be an endless debate on the merits of using a multiple time-frame approach in technical analysis. Some FX traders swear by it, while others are just fine using technical analysis on a single time frame.

What few people realize is that switching from one time frame to another means you might be able to spot something that you would otherwise miss.

4. Don’t trade at all if you can’t accept losses.

Acknowledge that you’ll take losses, and that you must control them ruthlessly to preserve capital. The biggest cause of losses isn’t bad indicators; it’s failure to admit your indicators are sometimes wrong and you need to intervene to control losses. Technical analysis is about making money, not about proving your indicators are right. You can’t make money if you can’t control the occasional loss. The tool for managing losses is the stop-loss order. No trader is successful over the long run without using stop-loss orders.

5. Learn What Markets to Work On

Whether it is forex, stock CFDs, or commodity CFDs that you are trading, some technical analysis methods are purely designed for a particular market.

Therefore, it makes sense that you first understand the markets that your technical analysis methods were initially designed for.

As an example, simple indicators such as the Advance/Decline or the VIX indicators are primarily suited for the stock markets.

You can learn more about technical analysis at forum.forex

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