Forex technical analysis – why do people choose it? When Forex prices move, they do so primarily in response to decisions made by big financial institutions; small traders invest with too little money to make any noticeable impact on prices. The big financial institutions may have the really valuable information about the economy, and they reveal that information as they drive prices up and down.
Following the footprints of the big financial institutions, the forex technicians search their currency charts for evidence of future price movements. The technicians seek for a new low, higher high, small decline followed by a larger rise and, etc. There is some truth to this but overall the market is a combination of rational and irrational events.
“Markets can remain irrational a lot longer than you and I can remain solvent.” John Maynard Keynes. He was the British economist that founded the Keynesian economic and influenced modern economic, political theory, and government’s fiscal policies.
After 12 years of stocks and Forex trading, I just realize that John Keynes’ single sentence has summed up all of my trading experiences. Even if I can across his single statement 12 years ago, I would not appreciate it as much as I appreciate it today.
I pride myself of being a foreign currency technical trader; however, I do not base my trades on indicators. Most traders don’t spend enough time learning how to draw trend lines. What new traders don’t understand is that trend lines make up 90% of the technical analysis.
Keys take away: 1) the market is irrational & 2) trend lines are 90% of Forex technical analysis.
