Technical Forex Strategies

If any of us had a real crystal ball that foretold the future with total accuracy no one would need fundamental or technical analysis of Forex currency rates. This is, however, the real world where nations and governments do not always act rationally, where events can change cash flow between nations over night, and where market psychology can drive prices up or down contrary to what fundamentals should dictate. It is with the use of technical Forex strategies that many traders make profits in real world Forex trading. Scalping, trend trading, gap trading, trading within Forex channels are ways to hedge currency risk and gain profits in trading foreign currencies. Traders use approaches like a Forex long straddle options strategy to minimize risk and gain profits in the Forex markets.

Why Technical Forex Strategies

At a given moment Forex pricing often does not seem to make sense. Traders buy and sell currencies, futures on currencies, and options on currencies. They do this according to their own analysis of the market and its prospects. Many times the market itself is a greater force in pricing than the fundamentals that eventually determine currency rates. Thus many traders simply choose to use technical indicators to assess market sentiment. These indicators work in trading the market after it gaps up or down upon opening. They work for scalping, trend trading, range trading, and identifying when a channel breakout is about to occur. Technical Forex strategies often result in profits when fundamentals only lead to confusion and losses.

When the Forex Market Jumps

So, you are trading the Yen versus the British Pound. Your Forex trading chart shows continuous pricing, day after day and week after week. Then one morning the Yen opens significantly higher versus the pound on the New York market than it was upon closing when the night before. Something significant has happened to drive the price of Yen up. If you had anticipated the event in question you could have made great profits by purchasing Yen before the market closed the night before. But, like most folks you did not see this coming. Now the New York market opens to a significantly higher Yen price. Will the price stay up, go higher, or correct downwards? Depending on the news, the direction of the Yen may or may not be clear. Here is where Forex gap trading comes in as one of the technical Forex strategies. Important news drives currency prices and often results in a period of market inefficiency. Forex gap trading with tools like Japanese candlesticks helps trader profit when the fundamentals are cloudy.

Markets Repeat Themselves

To a degree there is nothing new under the sun. Market enthusiasm and market panic are as old as markets. There are price patterns that recur in currency and other markets time and time again. Read the first part of the pattern and you can reliably predict the second part, trade accordingly, and pocket your profits. Learn technical Forex strategies to identify changes in market sentiment and avoid falling prey to the enthusiasm and panic that all too often drive the actions of many traders.