Saturday, October 21, 2017

3 Forex Technical Analysis All Trader Must Do

October 20, 2016 by  
Filed under Forex FAQ & Latest Post

In today forex faq, we have a question from one of our fellow traders asking me to advice him on the forex technical analysis he should make when he is doing an entry or exit for his EURUSD trade.

Below is the question

Hi Kelvin, what is the technical analysis a beginner trader must make when entering or exiting a trade for EURUSD

First of all, I will like to take this opportunity to advice all of you who are new to forex and do not have a reliable strategy on hand at this moment.

Please do not trade with a live account with your hard earn money. It is always advisable to start trading with a demo as it is where you can validate if the forex strategy you are using is profitable or not.

I have been receiving email from students telling me how much money they have lost either by trading themselves or by those robots in the market that are created by those marketers.

Worst of all, I have students who borrowed money from friends and relatives and then lose them all. Trust me, you can’t trade forex with what you have learned in those free youtube videos. Most of the videos out there are teaching you general strategies that have not been fine tuned. That is why you will lost money when you trade with those strategies you have learned there.

What you can do with those strategies you have learn from Youtube is to do some fine tuning to it and see if it does improve its winning percentage or not.

I have written a blog post sharing how I formulate my own forex strategy and you can read them via the link below

Therefore the best way to tell if a strategy works or not is to try it on a demo for 1 to 2 months. You should only move to live trading after you manage to get 2 consecutive months of profits with your demo account.

Now back to the question on what forex technical analysis must a new trader so when entering a trade or exiting a trade.

1) Identify the Trend

For me, I will always advice new traders to trade in the direction of the forex trend as it is always easily to make money with the trend than against it.

Therefore what you can do is to plot 100 EMA, 200 EMA and 400 EMA on your chart. If they are stacking each other with good angle and separation, it means that you are seeing a good trend and therefore you should enter trades that are in the direction of the trend using your trend strategy.

EMA good trend

When the EMAs are clustered together, it means that the price is now ranging and is now moving sideways. Therefore you can now use your range strategy to profit from the ranging market.

poor trend

If your strategy is telling you to trade against the trend, then I will suggest that you avoid the trade as even experience trader can have problem with trades that are against the trend.

2) Mark out Major Support and Resistance Levels

I will advice that you start to mark out major support and resistance on your chart as well as those higher time frame chart.

You can mark out those major swing high and low as well as Fib or Pivot levels that the price will most probably get repelled by.

These levels make very good exit point for traders as well as entry point.

For example, your strategy entry plan is when the price breaks through a trend line. If you see that the price has just hit a major resistance levels and then break below your trend line, this gives you higher probability that the price will move down in your favor.

Therefore mapping out all the major support and resistance is very useful for a trader be it for entry or exit.

3) Trade Validation/False Alarm Reduction

Trade validation is another important factor for a trader as this will help you to validate whether the trade is valid or not.

This will greatly reduce the number of losing trades you will get simply by helping you filter off false alarm trades that are produce by your indicators.

The above are the analysis you have to make when you are entering or exiting a trade. Trading forex is not as simple as enter a trade based on the signal of one indicator. You must have a precise entry technique and exit technique so that there is no guessing on your part.

Lastly, no matter it is a strategy that you have formulated yourself or learn from anyone, you must always test it on a demo first before you trade it with your hard earn money.  

I hope that I have answered your question and do feel free to email me again if you have any question.



4 Responses to “3 Forex Technical Analysis All Trader Must Do”
  1. Ali says:

    thank you again Kelvin for this great post. i had watched and did read your posts on Moving averages for trend identifier and crossovers. Kelvin made it easy, nice and clear i just like that thank’s again Kelvin your posts, they are great source of knowledge.
    Please traders find attached the link about the moving average and the crossovers it can be worthy having it added to your strategies for good entry points but remember as Kelvin always say fine it tune on demo account before using it with real money.

    thank you Kelvin for your effort to feed us with knowledge.

  2. Keh says:

    Hi Kelvin

    You are absolutely right.

    I have used over 10 different robots in the market which in turn caused me to lose over $10K in trading forex.

    It was until I join your course that I really understand the right way to trade the forex market.

    How I wish I have found your blog much much earlier so that I do not have to waste my 10K hard earned money.

  3. Danny says:

    Great post Kelvin

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