Technical Analysis is probably the most common and successful means of making trading decisions and analyzing forex and commodities markets.
Technical analysis differs from fundamental analysis in that technical analysis is applied only to the price action of the market, ignoring fundamental factors. As fundamental data can often provide only a long-term or "delayed" forecast of exchange rate movements, technical analysis has become the primary tool with which to successfully trade shorter-term price movements, and to set stop loss and profit targets.
Technical analysis consists primarily of a variety of technical studies, each of which can be interpreted to generate buy and sell signals or to predict market direction. Please see our Technical Studies page for a detailed description of these studies and their uses.
One use of technical analysis, apart from technical studies, is in deriving "support" and "resistance" levels. The concept here is that the market will tend to trade above its support levels and trade below its resistance levels. If a support or resistance level is broken, the market is then expected to follow through in that direction. These levels are determined by analyzing the chart and assessing where the market has encountered unbroken support or resistance in the past.
For example, in chart below EURUSD has established a resistance level at approximately .9015. In other words, EURUSD has risen up to .9015 repeatedly, but has been unable to move above that point:
The trading strategy would then be to sell EURUSD the next time it gets close to .9015, with a stop placed just above .9015, say at .9025. This would have indeed been a good trade as EURUSD proceeded to fall sharply, without breaking the .9015 resistance. Hence a substantial upside can be achieved while only risking 10 or 15 pips (.0010 or .0015 in EURUSD).
On GCI's integrated charting system (GCI Multi-Currency Charts), the red support line shown above can be drawn by clicking on the "Trend" button at the top of the chart window, and then drawing a line by clicking the mouse once at the beginning of the line, and again at the end of the line.
You must change your mental attitude first from a normal person to that of a speculator. Almost all traders I have met, except a few successful ones who really made millions and billions trading in the market, simply waste all their time trying to learn the easiest part in perfection, like about how to read data and charts, and trying to perfect entry and exit skills, etc. Trading is a mind game and without having a right frame of mind, it is a losing game even before it starts. Training a trader`s mind is the first step for any successful trader but almost all new traders neglect that part and that explains why more than 95% of traders are a failure in the long run.
Acquiring the knowledge of the market is not difficult for anyone with average intelligence after a few years of hard study in the market. But it is neither the level of intelligence nor the knowledge that decides the outcome of the market operations of a trader. It is the decision making process that is so hard for most traders to overcome and that is the main reason for a success or a failure for all the traders. Some find it easy to make decisions and stick to it and most find it so hard to make decisions and stick to it. Unfortunately, any decision making process in trading is a pain-taking process and humans tend to avoid pains and go for pleasures even if for temporary ones. Assuming one has acquired enough market knowledge and acquired one`s proven trading system (this is the second most important element of success in trading, in fact. An edge in any system is based on the quality of info one has, charts being only an info of secondary quality not the best one)
Through studies and research, a trader faces the task of making decisions to put this knowledge and system into practice. Then, how many traders can honestly say they can commit their ranch when the trade is suggested by their own system (given that trading is just a chance game) and let the profit run for weeks and months when their system tells them, and how many can manage to cut the loss as a routine process when the situation arise. It all sounds so easy when saying it but so difficult when doing it affecting real money in the market. I still do not sleep well when I am running position because even if the profits are running into a few hundred dollars and the system is telling you to carry on, there is no guarantee that the profit will turn into a yard or two in a month time, and it may even turn into a loss in a day or two when something unexpected happens. A painstaking process in real sense. The pain is not knowing what will happen in the future and in fear of losing. So at the end of the day, assuming one has decent trading system and market knowledge and decent info, it is ultimately how disciplined and how well that trader can take the pain of making right decisions at the right time that decides the outcome of the trades. Hence I call trading a mind game. When I interview prospective young traders, I always look for disciplined and strong-willed person as my first priority as long as one has decent education, but strangely in many cases, it is some kind of genius or half-genius with lots of brains with no disciplines who turn up for an interview thinking only bright people can make good traders.
In fact, I always try to pyramid while position trading medium-term once I am convinced of a new medium-term trend emerging. Like in USD/JPY position trading 135-132 as an initial position, adding in 132 and 129 areas. Same for AUD/USD and EUR/USD with similar strategies. But sitting on positions and watching the counter-rallies costing truck load of money is not easy job to do and causes lots of pain all the time. Most traders even among experienced ones cannot bear that pain and give up too early.
But there is no other way to make a big money and we have to bite the bullet and "sit and accumulate" as long as the medium-term trend is intact.
That is why I always believe psychological aspects of trading is far more important than anything else in successful trading. A mind game like those bluffing game of poker.
Entries and exits can never be "irrelevant" for any trader for any purpose. It is just that psychological aspects of trading are much more important than entries and exits, and decisive for the success or failure of a trader in the long run. Perhaps exits are more important than entries because any perfect or near-perfect entries are possible only in hindsight.
The currencies are traded in pairs and therefore exchanged one for the other this is the reason this is called the exchange rate. The most of the currencies are traded against the US dollar, the euro, the Japanese yen, the British pound or the Swiss franc. These currencies have the greatest importance on the market and this is why are called the major currencies. According to a few other researchers we should include as well the Australian dollar within the group of major currencies.
When we analyze a pair we refer the first currency as the base currency and the second as the counter or quote currency. It is important that the counter or quote currency is the numerator in the ratio, and the so called base currency is the denominator. As a strict rule the value of the base currency always equals 1, which is the reason why the exchange rate tells how much of the quote currency should be paid to obtain 1 unit of the base currency. This same exchange rate as well tells the seller how much quantity is received in the quote currency for one of the base currency.
The speculator aim in Forex trading is to profit from the movements of foreign currencies. The price of currency pair is referred to as a "Forex rate" or just "rate" for short. The proof that forex is really good investment option we need to compare it to other similar solutions. At its very minimum, the return on investment in forex should be compared to the return on the so called "risk-free" investments. Classical example of a risk-free investment is the 
If you are trading currencies, it is advisable to trade only when your expectations are that currency you are buying is going to increase in value compared to the currency you are selling. If it happens, you should sell back the other currency in order to lock in a profit. This open trade (sometimes called “open position”) is a classical example of trade in which the player has bought or has sold a particular currency pair and relatively has not yet sold or bought back the equivalent amount in order to close this position.
Forex Trading - Your Easy Way to Make Money
Today lot of people venture into Forex trading as it brings easy money. With the internet it becomes very easy to deal with the forex market as all transactions can be done through your computer
. However one needs to know the basics of forex trading in order to be able to make money. If basics are not mastered one may suffer loss. This avenue to make money involves financial risk due to the unpredictable nature of the trade.
One need to be good at speculation in order to engage in forex trading. It is essential to have a very good understanding of the currency exchange patterns in the market. Another important factor that is crucial to make money here is correct timing. Though forex trading operates somewhat similar to share market it does not bear such great risks of the share market.
There are two ways how people make money through Forex trading. One is short term investment and the second type is long term investment. Forex traders should plan their strategy carefully regarding their approach. One can always switch between any of these two ways at any point of time depending on the speculation.
In short term Forex trading, the trader observes the currency patterns to take advantage of the sudden rise or fall of the currencies. The trader does not wait long to make money here. Profit is seen through short term exchanges; the strategy is used here is to make swift changes with little profit margin. Short term trading requires a certain level of experience to see profit.
Understanding Forex Orders
One thing that you must understand about orders is that when you buy or sell short, you are simply exchanging 1 currency for another. For instance, consider the Euro/dollar currency pair, which is expressed as EUR/USD. (Short tutorial: Currency Quotes) EUR is the base currency and USD is the quote currency. Since this is the most actively traded currency pair, most brokers allow you to trade it. When you buy EUR/USD, you are exchanging Euros for United States dollars, and when you sell this pair, you are doing the opposite—exchanging dollars for Euros. Note that buying EUR/USD is the same as selling USD/EUR, and vice versa. (You do not have to worry about having Euros in your account to buy dollars—the broker will take care of this for you automatically.)
