Market Analysis, Vital for a Successful Currency Trader

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

I find it extremely 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 part of my general technique. My Forex trading system incorporates other tools and indicators in order to make entries.

Other possible 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 perspective of the Forex market as a entire - over multiple time frames. Even although I may trade time frames such as the 1 hour, 4 hour or daily, very frequently I refer to the weekly and monthly time frames to look at 'the larger picture'. I find that by doing so, I am a lot much more familiar with the terrain and consequently I am more confident and encounter much less tension whilst trading.

I also do that because I want to align my trading with the over all direction of the market without being influenced by the market 'noise'. That is only visible on the longer time frames. Understanding the over all direction of the market is very important information.

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

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

It is important to stress that analysis should only be a part of a total 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 exactly where it is much more likely for the market to head to and I will look for brief possibilities. That is extremely beneficial information for any currency trader no matter which Forex trading system he uses.

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