Forex Charts – Deadly Mistakes to Avoid to Win Big

If you want to win at forex trading, using forex charts and technical analysis is a great way to do it. Forex charting is easy, saves time, and works; traders still make basic mistakes that cause them to lose.

Let’s look at the mistakes made and why you need to avoid them.

1. Forex Chart Prediction

A common mistake, traders think they need to predict to win, but of course this is just waiting or guessing and is bound to see you lose.

If you use charts the right way, you trade in the reality of the price change and you trade it, you don’t predict it.

There’s a big industry in forex trading that says prices move on a scientific theory and you know what’s going to happen next, but of course if prices moved on science we’d all know the price up front and there would be no market.

Don’t believe any of the prediction nonsense: trade the reality of the price change, i.e. if a price hits support, don’t predict that support will hold, wait for it to move the other way and trade the fact that It has remained.

Another great way to trade is to trade breakouts to new highs or lows now; It’s a proven fact that most big moves start with these breakouts, so make breakouts a part of your forex trading strategy.

2. The more entries, the better

5 or 6 indicators must be better than 1 or 2 – totally wrong!

The more inputs, the more chances there are for the system to break.

Simple forex trading systems work best and always have.

All you need is support and resistance and some indicators and you are all set.

3. Use of invalid data

You should use technical analysis on valid data, where you can get the odds in your favor.

Do not try to use forex day trading or scalping systems, the data is too short to be traded. All volatility is random and you can’t use it, so don’t: either follow the trend or trade forex.

4. Using indicators incorrectly

Many merchants do this.

They use lagging indicators like moving averages to input the price, or Bollinger bands are stops. This is not what they were meant to do!

Use an indicator for what was intended and understand its limitations.

5. Curve Fit

To be successful with forex charting, we’ve said that you need to keep your system simple, and doing so will prevent another common curve-fitting mistake.

Today, with powerful software packages, it’s tempting to backtest and tweak the rules to adjust the data and make a profit; this is also known as curve fitting.

If you do this, the system will crash in real-time trading, since no two data segments repeat the same way again.

To avoid curve fitting, keep it simple and make sure the rules you use to execute your trading signal are the same for all currencies and all market conditions.

A simple route to profit

Forex charting is essentially simple: you need to use support and resistance and some confirmation indicators and trade the reality of price change, whether it be breakouts or changes in price momentum near support and resistance tests.

If you do the above, you can build your own forex trading system in about a week and soon you could be making huge profits in less than 30 minutes a day.