Technical Analysis of the Currency Market: Classic Techniques for Profiting from Market Swings and Trader Sentiment

CHAPTER 1

FX 101

Know this. Technical analysis will not make you rich. It will not turn $1,000 into $1 million in a matter of weeks. It will not allow you to design a computer system that will automatically generate income while you luxuriate on the golf courses of Florida or snorkel in the azure blue waters of Cozumel.

Like every worthwhile endeavor in life, success in trading requires dedication, persistence, and a never-ending desire to excel. Technical analysis is only a tool—albeit a very good one—that if used properly can greatly sharpen and improve your trading in the currency market, but it cannot by itself make you a successful trader.

This book is about the practical application of technical analysis to the foreign exchange (FX or forex) markets. In it, I show you the key advantages as well as some of the limitations of this trading discipline. This book alone cannot guarantee success, but I can assure you of one thing: Your chances of winning will increase markedly if you learn to how to use technical analysis to trade FX.

Before turning to the business at hand, however, it's critical to understand how the FX market works and, more importantly, how it differs from all other financial markets that you may have traded.

TWO TRILLION REASONS TO TRADE

The FX market is the biggest financial market in the world. By the time you read this book its volume will have reached more than $2 trillion per day in notional turnover. That's right—you didn't misread the numbers. The FX ...