How important are technical indicators?

In our post on January 8th, 2008, we mentioned the two types of analysis that we use to predict currency movements - Technical Analysis and Fundamental Analysis. We said that you can use either or both. However you have to remember that neither is a magic bullet. They are tools that you need to keep as part of your personal trading tool kit.

For instance, we said technical analysis is one of the most reliable ways of predicting price movements, and it is. But you have to learn to use technical indicators in the context of the market.

1. Don't use technical indicators to go against a trend. Look at the prices. If the EUR/USD is at 1.3443, then goes to 1.3440, then 1.3333, then 1.3329, you can see the market is in a down trend. In this context, indicators showing what the market will do next or what it SHOULD do are of no use. You must stay with the trend. To work out the price action of a currency pair, you have to be concerned with what the market IS doing, not what it MIGHT do. Look at the prices to tell you.


2. Never forget that technical indicators are only CONFIRMING what the market is already telling you. To be a successful trader you need to learn to listen to the market.

If you keep these reminders in mind, you will be able to use Technical Analysis successfully because it will be your servant or tool, rather than dictating all the decisions you make. And make no mistake, it is one of the most powerful tools you have. Easy-Forex will provide tuition on how to use the various types of Technical Analysis and they have what is almost certainly the most comprehensive and detailed collection of charts you will find anywhere.

And there is always more to learn at http://www.bizwrite.co.uk/Forex/forexindex.html