Is a basic knowledge of technical analysis necessary in order to have a successful Forex trading experience? Only if you are part of the majority of Forex traders who rely on technical indicators to make their trading decisions.
Of course, it doesn’t mean that technical analysis is junk in terms of trading. In fact, a lot of traders can’t trade profitably without consulting the indicators of their choice. What this is driving at is that technical analysis is not the only route to a profitable trading career.
Fundamental analysis can take the place of technical analysis. This means a long term perspective of the direction of a particular currency by utilizing the present economic status as well as future economic predictions.
In 1992, George Soros took a short position on the pound. Consequently, he pocketed over $1 bn as the pound was withdrawn from the European Exchange Rate Mechanism by the Bank of England. His decision was based more than an overbought RSI or stochastics-he considered economic and political conditions.
If that method is shaky for you, try the short term method of trading the economic news releases occurring on a daily basis. It is difficult to do, but not impossible. What’s good about this method is that you get volatile swings right after major announcements, thus, presenting good trading opportunities.
If, after all, you don’t have the vibes for fundamental analysis on Forex trading (whether long term or short term), one other option is to trade currencies based solely on price.
The best indicators you really need in trading is PRICE. It is price that indicates what has happened to a currency’s price in the past. When interpreted correctly, it is an effective means to predict its likely direction in the future.
In price action, traders need to be keen in looking at charts, price movements and interpreting past price action to forecast future price movement. Furthermore, traders must be patient and observant in determining certain patterns that occur in a day-to-day basis.
Using indicators in Forex trading is not really bad or completely pointless. Because in fact, there are price behaviors difficult to see by watching pure price action. What is ill-advised is relying too much on such indicators on actual market movement-or worse, letting these indicators do the trading for you.