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Some Forex traders believe technical analysis is an easier approach to trading than fundamental analysis. However, if you’re going to use technical analysis, you’re going to have quite a learning curve.
For one thing, it can be challenging to understand Forex technical analysis. Moreover, you’re going to need a good amount of practice to become familiar with the charts. In fact, even Forex traders who have experience with the market still find technical analysis challenging.
The solution is practice, practice, and more practice. To give you a little boost, though, here are five ways to improve your technical analysis and Forex trading skills.
1. Stick with a Forex Technical Analysis Method That Works for You
To get good at Forex technical analysis, first find one method that works for you. Then stick with that method until you know it inside and out. In the process, you will identify areas where you can improve. Plus, you will learn ways of adapting your strategy.
However, what you should not do is jump around from one method to another, looking for the perfect system. Instead, find a method that works for you and stick with it until you learn it well.
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2. Should You Use Multiple Time-Frame Approach?
Traders can debate endlessly over the merits of whether to use a multiple time-frame approach or a single time-frame in Forex technical analysis. Some traders swear by using a multiple time-frame approach. However, others just focus their technical analysis on a single time frame and do just fine.
But here’s the thing: Forex traders who use a multiple time-frame approach can spot things other traders miss. This is only true if the time frame or time frames they are using are compatible with the methods they’re applying. But it does give them a slight edge.
3. Take a Deeper Look at the Basics of Forex Technical Analysis
Maybe you’re using price action techniques. Or perhaps you like using Forex indicators. However, regardless of the methods you’re using, try to research deeper into whatever those methods are.
For example, Elliott wave and Andrew’s pitchfork methods have been around for decades. If these are the methods in you prefer, do a little research into their history. This will give you a better understanding of the roots of these concepts and why they work the way they do.
Additionally, you might be surprised about how the Forex technical analysis methods you’re using now have changed over time. In the process, you’re sure to build your confidence about your Forex trading. Plus, you’ll probably pick up a trick or two.
4. Use the Technical Analysis Method That Works Best for the Market You’re Trading On
You could be trading on the Forex market, or you might be trading stock CFDs or commodity CFDs. It’s important that you use the technical analysis methods that work best for whichever market you’re trading on.
In other words, make sure you understand which market your favorite technical analysis methods were designed for. For example, the VIX or the Advance/Decline indicators are primarily suited for the stock markets.
So it really doesn’t make sense to use these indicators in the currency markets. Instead, look for a method that was developed specifically for currency trades.
5. Don’t Get Complacent—Keep Learning
Many Forex traders find one method of technical analysis they’re comfortable with, then they stop growing and learning. However, the more successful Forex traders are always trying to improve their technical analysis skills.
To stay up-to-date, subscribe to technical trading journals. Also, learn more about the background of the tools you’re using by reading books about technical analysis.
For example, John J. Murphy has written several books about technical analysis of the financial markets. Any one of them could be a great way to start your research. As you read, you’re bound to gain insights into the various technical analysis methods.