Monday March 14, 2011 18:02
Technical Analysis Tips For Forex Traders
Posted by Pro Trader as Technical Indicators
Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade. Master these highly profitable Candlestick Patterns with this 82 page FREE Candlestick Guide. Download this 52 page Ultimate Technical Analysis Handbook FREE. This technical analysis handbook is going to make many of your concepts about technical trading clear and is a free gift from the Elliott Waves International. How to increase your forex profits with trading indicators? If you have been trading for a while, you must have by now realized the importance of technical analysis and technical indicators. Indicators are at the heart of trading. But always keep this in mind, there is no Holy Grail Indicator in trading. All indicators give trading signals that can be false.
So how do you filter out the false trading signals? By using confluence. Confluence in trading means confirming a trading signal given by one indicator by a second one. For example, if you are using divergence as your main trading strategy than trading alone on divergence may not be profitable.
What you need to do is to confirm the divergence with candlestick patterns or another indicator. This way you increase the probability of success. Don’t be impatient. If you find a trading signal by one indicator wait for the confirmation by another indicator. This confirmation will filter out any false signal.
Once, both the indicators are confirming each other, you can safely enter into a trade. Different traders use different confluence strategies. With a little practice, you can also develop or find a strategy that works for you. In the same manner if you use candlestick patterns to get trading signals confirm them with another indicator like Stochastic, MACD, RSI, CCI or whatever is your favorite indicator.
Master how to use trendlines in trading. Drawing trendlines is an art that you can easily master. Trendlines can give you the support and resistance in the market. Support and resistance is a very important concept in trading. Using trendlines, you can easily find support and resistance. These trendlines will also tell you where to place the stop loss something very important for risk management.
Another thing that you need to keep in mind is: “Don’t use too many indicators.” Just master two indicators and then stick with them. MACD and Stochastic are two very versatile and robust oscillators that you can master. MACD ( Moving Average Convergence Divergence) is the difference of two moving averages and is a momentum oscillator that gives overbought and oversold signals.
In the same manner, Stochastic is also a momentum oscillator. Oscillator is an indicator that oscillates between two values. So, mastering trendlines, moving averages, candlestick patterns and either MACD or Stochastic will set you up as a forex trader and soon you will find your trading confidence increasing and profits increasing too.