| You may have heard the saying ‘A Trend is | | | | successful traders stay with the market and |
| your Friend until it Bends’. Technical Analysis | | | | maximize profit according to his or her equity |
| helps us to identify a trend so we can jump on and | | | | management rules. |
| ride it until it changes. Since the Forex market has | | | | If the market turns, the smart trader will get out and |
| very strong trends, technical analysis is a very | | | | collect profits. |
| effective technique. | | | | Watch the market and listen to what it tells you |
| Some traders still persist on trading against the trend, | | | | about upcoming trends and most importantly |
| they argue with it even though price movements are | | | | don’t ask for reasons for what it does, focus on |
| obviously in a trend. Buying when the currency is in a | | | | the essentials. |
| basic downtrend or selling when it’s in an | | | | There are often repeating patterns in price changes. |
| uptrend, instead of buying. | | | | Once established. They become the most probable |
| Our primary purpose is to identify the major trend, | | | | way to predict price changes. |
| intermediate trend and the short term trends and | | | | These can be categorized into two types of |
| place trades in that direction. We then hold position | | | | markets, trending and trend-less. Trending markets |
| until our calculations suggest otherwise. | | | | have up and down trends; these are typically less |
| Here’s a quote from Jesse Livermore, a | | | | than 45° and are steady movers with occasional |
| tenacious, flamboyant and profitable Forex trader, | | | | pauses or profit-taking periods. |
| "We know that prices move up and down. They | | | | Trend-less markets have very steep movement of |
| always have and they always will. My theory is that | | | | more than 45° that most often can’t be |
| behind these major movements is an irresistible force. | | | | sustained. Although price movements can shift a |
| That is all one needs to know. It is not well to be | | | | considerable number of pips in a short time period |
| too curious about all the reasons behind price | | | | they often don’t produce much net profit. |
| movements. | | | | Choppy markets often produce stop outs and the |
| You risk the danger of clouding your mind with | | | | sideways market, with minimal price movements |
| non-essentials. Just recognize that the movement is | | | | makes it very difficult to predict which way the price |
| there and take advantage of it by steering your | | | | will move. |
| speculative ship along with the tide. Do not argue | | | | For these reasons, our objective is to get into a |
| with the condition, and most of all, do not try to | | | | trending market and meet our trading objectives. |
| combat it." | | | | The underlying message here is, “Be a good |
| There’s gold in these words. If the market | | | | friend to the trend”, a simple concept but |
| action shows your analysis to be correct, the | | | | powerful indeed. |