For newcomers to Forex trading, it is better that they opt for trading using Technical analysis tools. Technical analysis disregards the fundamental aspect of the market but rather concentrates on measuring the level of reaction the market will have to its fundamental movements. In essence, you are going to hitch a ride on a trend by analyzing how a trend will move and by how much.
With technical analysis, you will be able to identify, and confirm the formation of a trend with enough lead time to allow you to capitalize on it to make some profit. It allows you to decide where your exit point from the market is by analyzing the direction of the price.
Thus, it is less taxing to focus on technical analysis as compared to fundamental analysis. In addition, you also have greater chance of success in trading with technical indicators. There are literally over a hundred technical indicators that you can utilize to help you in Forex trading. Furthermore, you also have many types of charting software that will help you calculate all these indicators.
No single technical indicators can provide all the answers that you need. In fact, you will need to use an array of technical indicators before you can have a complete picture of how the movement will move. What's important is not which technical indicator is better but rather how you will select the few indicators that will help you get an overall picture.
Because the majority of the technical indicators are used to perform the same basic function, that is, to identify prospective trades, it is important that you seek to understand how they work and their implication on your trading strategy. Only after you understood what they are used for will you be able to have a good selection of tools to use.
The majority of novices always make the same mistake of overloading themselves with all the tools that are available. In the end due to information overload, they freeze up and are unable to comprehend all the information supplied by the technical indicators. Try to keep things simple.
- Too many technical indicators will be counterproductive due to information overload.
- A selected few technical indicators will equally do the job as compared to having dozens of tools.
- With clearer focus, you will be able to discern the right patterns and thus trade with more discipline and productivity.