technical indicators

One of the first things that a beginner to Forex must do is studying and understanding technical indicators. Technical tools are very popular among both professionals and amateur traders, and no study of Forex trading can be complete without taking a look at them. In this brief article well examine the basic principles behind technical trading, and how technical indicators can be used, in general, for profitable strategies.
In most basic terms, technical tools are used to create trade signals from the price action. From the raw price data it is not possible to determine which price is high, and which is low, because prices dont have an upper limit to them, and they almost never reach zero. As a result, we need tools that will tell us, in relative terms, that a low price is low enough to constitute a buy or sell signal depending on the trading style used and the conditions of the market. Technical tools are mostly used for this purpose.
Not all indicators perform equally well in all markets. For example, the RSI is mostly used in arranging market. Trending markets dont ever take its overbought or oversold signals seriously, and consequently the indicator will generate many false signals in such environments. Moving averages are best used in trending markets. In ranging markets they will zigzag too much, and wont offer clear signals. The Fibonacci indicators, on the other hand, can be used in many different conditions and in many different ways. Knowing which indicator is most productive and reliable in terms of trade signals is an important part of technical analysis.
Another important point to keep in mind while using these indicators is that technical indicators never give perfect signals. They only alert us to conditions that might be appropriate for the opening of a position, but the choice is always ours. Any number of indicators can fail at the same time, and a single indicator can make a correct statement about the future of price action while being contradicted by everything else. Successful use of technical indicators requires that the trader always keeps in mind the possibility of failure. And as such, technical tools should always be coupled to a sound money management plan which can be used in case events dont progress as expected.
In conclusion, Forex strategies can depend on any kind of analytical approach. One can use fundamental or technical analysis, or a combination of the two, for profit. Common sense, and a conservative approach to arising opportunities are what distinguish the frantic speculators from seasoned investors, and the key to success lies in patience and discipline, not in genius or special talents.