Technical analysis
Many beginners make their investments basing on Technical Analysis, because it offers clear buy or sell signals, hence it is easy to understand. On the other hand this fact can be very tricky:
Technical analysis its not only using one indicator. It also involves chart patterns, trends, resistances and supports, combination of indicators and knowing their specifics. ExclusiveFX has a technical Analysis Department which runs varied analysis and considers all the possibilities.
First of all, the main challenge for a beginning investor is to chose an indicator. There are thousands of indicators and over 200 main and commonly used indicators. How do you know which one should you choose? If you chose the wrong one you will get a false signal. Also combinations of indicators, how certain are you that the two or three indicators you use work good together? Will you use RSI together with MACD or with some other oscillator?
Second difficulty is that, once you have already chosen an indicator, how will you know how to determine appropriate parameters. Assume you are using MACD on 1H chart with predetermined periods of 26,12 and 9. How do you know if this setting is appropriate first for your currency cross, second for your chart type, for your time frame. Maybe 22, 10, 8 would be better?
Not many investors know that professional technical analysts in big banks don’t have 4h charts. Most of the technical analysis is done on 1h or 1d charts. This means that when you use 4h, then most likely big banks are not. Sometimes in order to buy or sell, you need to confirm your indicator on 5m,15m and 30m charts, but for this time frames you might need different parameters. Do you know that these parameters depend on calculation of volatility of given currency over given time frame? Also they might be depended on chart patterns and they need to go in line. What if you have a buy signal from your MACD and a double head and shoulder pattern is created? Do you buy, or sell or wait? How do you know if MACD works for USDCHF better than for GBPJPY? ExclusiveFX has a team of professional charts analysts who know how to handle Technical Analysis.
Third of all, did you know that some indicators are programmed only for stocks, others for currencies and others for commodities. Eliot wave is designed only for stocks, and it is a mistake to use it for currency analysis as it will give you a false result. Investor must know specific indicators and its applications. Fourth main challenge is also recognizing the destructive force of fundamental trades and momentum, trend trades which distort results of financial analysis. You need to account for them and know that so called ‘noise’ should be disregarded in terms of direction indication, but can be useful for establishing supports or resistances. It is also worth recognizing the fact that some indicators perform good with volatile markets and other perform better in calm and one way markets. Sometimes an indicator will perform very well for you for 6 months, and then will become useless. Do you know why? Will you know how to adjust it to new market conditions?
There are many things an investor needs to know when performing technical analysis, and according to our specialists, it takes hard work to learn it in order to be profitable. An investor needs to spend many years studying it to become successful and needs to have a good mentor. So if you are not sure about your trading skills, do not risk your money on trading on false indicators, use ExclusiveFX instead. Our experienced chart analysts can provide you with an edge as soon as you become our customer! ExclusiveFX has a team of professional chart analysts who know how to handle Technical Analysis. To get access to our Signals click here.