Market Analysis, Important for a Effective Currency Trader

There are many ways to analyze the Forex market in order to be profitable as a currency trader.

I find it very helpful to use Elliott wave theory in my market analysis. This does not mean that I base my entries solely primarily based on Elliott Wave theory. No, this is only component of my general technique. My Forex trading system incorporates other tools and indicators in order to make entries.

Other feasible methods to analyze the currency market may include: trend analysis, Forex news analysis, candlestick analysis, pattern analysis, technical analysis, and numerous others.

For me, it is essential to get an overview and viewpoint of the Forex market as a entire - over multiple time frames. Even though I might trade time frames such as the 1 hour, 4 hour or daily, very often I refer to the weekly and monthly time frames to look at 'the bigger picture'. I find that by performing so, I am much much more familiar with the terrain and consequently I am more confident and experience much less stress whilst trading.

I also do that because I want to align my trading with the more than all path of the market without becoming influenced by the market 'noise'. That is only visible on the longer time frames. Knowing the over all direction of the market is extremely essential information.

Having the information that I get by performing my market analysis allows me to strategy my trades ahead of time no matter what my specific Forex trading system is. As a currency trader, I am a lot better equipped to trade the Forex market. I can search for specific and profitable opportunities on shorter time frames with a lot more confidence, understanding that I 'trade with the trend'.

For instance, if I know that the direction of the trend on the weekly time frame is short, it will be a lot much more lucrative for me to look for short trades on the 4 hour and daily time frame. In this case, any up movement will be corrective and probably less profitable.Also, by performing an in depth analysis, I consider various possibilities in advance and I know where I am likely to be incorrect (and therefore set my s/l accordingly.

It is important to stress that analysis should only be a part of a complete trading strategy analysis generally serves as a guide only. Entries should be based on particular trading rules.

In conclusion, by utilizing prior analysis, a lot of the guess work is taken out. I know where it is more most likely for the market to head to and I will look for short opportunities. That is very beneficial information for any currency trader no matter which Forex trading system he uses.

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