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I have heard people lament how difficult it was to perform technical analysis and how they can never learn the skills. There were also many critics or fundamental believers that the stock market can never be timed and that we market technicians are wasting our time trying to beat the market using technical analysis. Technical analysis was thought to be a study of past price behaviors and critics were saying the past doesn’t reflect what will happen in the future. They are both right and wrong. They are right because technical analysis is not a crystal ball where it is 100% accurate. They are wrong because technical analysis reflects the human emotions happening on the charts. Do human change over the centuries? As far as emotions are concerned, fear and greed are human nature that will never change! Humans will still do insider trading even if it is illegal due to greed. We saw how corporate governance though tightened over the decades was not fool proof to these criminals. Humans will still fear losing paper profits and they will still fear declining stock prices leading to declining capital. All these emotions can be found on the charts as they happen. Ask yourself, how many times have you seen a stock price run up before news is released? Anticipation of shareholders? Well, maybe but how about insider leaking the news? Think about it.

Every night I study in details charts and it is through all these relentless efforts that I became very familiar with technical analysis. If a lawyer wants to win a case, he will study the case carefully and also refer to past cases. We all know lawyers acquire large money, but it is really this hard work of preparation that justifies their large pay. As a trader, we can't slack too. Hard work and efforts must be place in to learn technical analysis. Long hours of studying these charts will enable us to be very proficient in chart reading and recognize purchase or sell signal in a flash as the experience build up. There is no shortcut to success in trading as far as I’m concerned.

I started trading as a loser and often times am only interested to know which the next stock to purchase is. This is not why legends prefabricated their fortune in the stock market. Each single book that I read, suggest us to study past charts and get familiar with all the chart patterns or price/volume relationship. Hence why shouldn’t we follow? After all, they are the ones who have done it and been there.

Remember, human nature never changed and this is the fundamental reason why technical analysis will work.

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Decipher

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http://growmoney.blospot.com where my trading journey never ends

Before starting on the foreign exchange market, we must comprehend some basic precepts of forex. Among the concepts essential to know, next to the carry trade or the technical analysis is the fundamental analysis.

Again, it should be noted that fundamental analysis is inseparable from the technical analysis, and vice versa, because they grant when combined to make investment choices, if not wiser, at least more thoughtful . Fundamental analysis is based on the evaluation of an economic indicator. These include employment figures or the publication of the index of activity in Chicago.

The main economic indicators

Of all the economic indicators, some have a larger impact on other currencies. Thus, the index of activity in Chicago, when published, had less influence on the exchange rate of the dollar as the publication of unemployment figures. In fact, to know what the economic indicators are the most important, you only need a tiny experience. However, beginners in the foreign exchange market can go, at least, the principle that there are four economic indicators do not miss when it appears on the economic calendar this week. It is the interest rate, the unemployment rate, the rate of inflation and the consumer confidence index. These four economic indicators generally affect investment decisions of many traders.

The importance of the irrational

However, we must always keep in mind that financial markets are, by nature, thank you for the irrational behavior. Thus, even if the decision of a central bank to lower its rates or not, for example, often plays on the currency rates, one should keep in mind that nothing is gained. We must take statement of market expectations, which can be met or satisfied, and the aversion to risk might go absolutely unnoticed to the publication of economic indicators.

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