In some ways, technical analysis may seem easier and simpler than fundamental analysis when trading Forex. However, the truth is that it takes some time to learn.
Starting, Forex traders often have difficulty understanding the technicals. Building familiarity with the charts requires quite a bit of practice. FX traders with some experience, even intermediate ones, still find technical analysis hard. The only way to get better is to practice, practice, and practice.
The following tips will help you improve your technical analysis and Forex trading skills to make the learning curve just a little bit easier.
1. Find out the most reliable strategy
Many FX traders are constantly switching from one strategy or approach to another in search of the perfect trading system or technical analysis approach.
Finding a method that works for you and sticking to it until you fully understand the theory behind technical analysis is the key to becoming good at it. You can then automatically identify areas of improvement and modify your strategy in response.
2. Know the support and resistance
A technical analysis starts with this fundamental aspect. The usefulness of every indicator varies with price and the persistence of identifiable phases of growth and retraction.
It would help if you first observed how the price has fluctuated and where resistance and support levels are before adding levels of sophistication to charting these patterns. You will be better able to determine trends if you develop an eye for identifying basic recurring movements in price.
3. Never reverse your trading plan
The technical indicators we discussed do not always indicate the right direction. There are no chances of reversing or controlling a trade once entered. We can, however, control our emotional responses. Stop losses reduce our losses as it reduces the losses from our trade. Accepting the losses should not stress us out when we are trading. To overcome our losses, we should establish our own trading rules.
4. Go back to basics
Price action is a technique you may use, or you may be partial to Forex indicators. Regardless of which methods you employ, it’s always helpful to research deeper into the methods you employ.
It could have been decades since you created some technical analysis methods. The Elliott wave method and Andrew’s pitchfork method, for example, are centuries old. Nevertheless, you can understand how the concepts started and why if you use such methods in technical analysis.
Today’s technical analysis methods have changed drastically over the past few decades, as you may be surprised to find out. You may find that it is just a good walk down memory lane, but you may also learn something. Moreover, it will undoubtedly boost your confidence in performing technical analysis.
5. Don’t trade if you are afraid of losses
We will inevitably lose money when trading stocks; we cannot control those losses. As soon as we win, we tell everyone about our strategies, but as soon as we lose, we keep our mouths shut, and it will make us feel bad inside.
It would be best to control this emotional reaction, and you should devise strategies to overcome the loss. For example, trading without a stop loss is never a good idea. We should not trade if we cannot absorb those losses.
Bottom line
It is best to understand the foundational principles of technical analysis and then apply them through backtesting and paper trading. Today, many brokers and websites provide electronic platforms where simulated trading resembles live markets due to today’s technology.
Despite the lack of shortcuts to success, aspiring traders can develop a knowledge base and feel for markets over time, giving them an edge when trading.
