The significance of simplicity with regards to the method used to trade the forex market cannot be emphasized enough. A simple method keeps your mind clear and allows you to focus your conscious mind on managing your emotions and maintaining discipline, rather than trying to decipher a confusing mess of lagging indicators all over your charts. Most forex traders spend entirely too much time searching for that “holy grail” trading system that they think will turn their trading around and allow them to retire early. The cold hard truth is that there is no “holy grail” trading method, trading is hard, it takes self-control, intense discipline, and a strict focus on risk control, these are the most important factors to consistent success in the forex market; not a fancy trading system.
That being said, you do obviously need a solid trading plan designed around a relevant, simple yet effective trading method. The most simple and easy to understand yet highly effective trading method to navigate the forex market with is trading based on price setups while only using a bare bones price chart. Price forms repeating patterns that to the trained eye can be deciphered and employed as a fully functional entry system and or exit system in the forex market. All the data required for a relevant and accurate trading method is supplied for free by the forex market in the form of price action on any price chart. If you think by paying thousands of dollars for some black box system or for an eBook that promises to “unlock” the secrets of the forex market, you are going to get rich quick, then you have fallen prey to the scammers. There are countless people trying to sell forex products that are little better than chance and don’t actually teach you anything, these people are generally those that have given up on trading themselves and have no idea what they are doing.
If you find yourself putting lagging indicators on your charts in order to find an entry signal or analyze possible price direction you need to ask yourself one question; is there a more logical way to analyze this market? The most logical way to analyze forex or any market is to look at what price action is trying to tell you. Price movement is a reflection of human behavior. Human behavior is repetitive; people generally react with a certain range of emotions to any economic event. This is why you here such sayings as “buy the rumor, sell the fact”, this saying results from the way markets behave to news. Markets operate in future time, meaning traders bid up the price when they expect something good to happen or offer the price lower when they expect something bad to happen. Once the event actually occurs there is nothing more to expect so price will generally begin to move in the opposite direction.
All of these events are tipped off by price action on a naked price chart. There is no sense in trying to use an indicator to analyze human behavior reflected on a price chart when the raw price data is the closest reflection of the aggregate result of that very behavior in and of itself. Simple forex trading methods like price action analysis allow you to see what the mass of the forex trading community is trying to do. Price movement gives a clear window into the aggregate trading mind of all market participants. There is no need to confuse yourself with news analysis and lagging indicators when you can get the same information straight from the proverbial horse’s mouth.
Nial Fuller is a Respected Trader and Forex Coach. He runs a Forex Training and Education Website, Visit his site here Simple Forex Trading Strategies