Is It Possible To Trade Forex Without Using Technical Indicators?
- Date: 2008-11-05 - Word Count: 400
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If you talk to any forex trader, you will find that the vast majority of them use technical indicators to make their trading decisions. However this does not necessarily mean that you need be an expert in technical analysis in order to be a profitable forex trader. Far from it in fact.
There's no question that technical analysis can help you greatly in making trading decisions, and many forex traders would be hopelessly stuck without it, but it is still possible to make good profits without using any technical indicators at all.
For instance you could decide to take a longer-term view and use fundamental analysis to help you make your trading decisions. This way you don't need to be so precise about your entry points and you can sit back and watch your position unfold without having to be constantly watching the markets all day.
This type of trading requires you to be able to interpret the current economic climate and to some extent predict future developments, such as which way interest rates will move in future months.
A classic case of someone who was successful using this method is George Soros, who took a now infamous position on the British pound in 1992. He shorted the pound heavily shortly before the Bank of England withdrew the pound from the European Exchange Rate Mechanism and pocketed over $1bn. This was obviously based on economic factors rather than any fancy technical indicators such as an oversold RSI or MACD crossover.
So you can definitely make big profits from long-term fundamental analysis, but if you are more of a short-term trader then there are still profits to be made. For example, you could look to adopt a strategy based on trading the economic data releases.
This is quite difficult to do, and is not something I'm particularly good at, but it is definitely possible to make profits this way. Indeed I know a few traders who trade the news releases for a living. The major announcements can create wild swings in a currency's price so there are plenty of opportunities to trade these volatile movements in price.
Finally, if fundamental analysis and technical analysis aren't your thing, then you can always use the only meaningful indicator you really need - price. After all the price history tells you how the currency has behaved in the past, and if read correctly can be used to predict future movements as well.
There's no question that technical analysis can help you greatly in making trading decisions, and many forex traders would be hopelessly stuck without it, but it is still possible to make good profits without using any technical indicators at all.
For instance you could decide to take a longer-term view and use fundamental analysis to help you make your trading decisions. This way you don't need to be so precise about your entry points and you can sit back and watch your position unfold without having to be constantly watching the markets all day.
This type of trading requires you to be able to interpret the current economic climate and to some extent predict future developments, such as which way interest rates will move in future months.
A classic case of someone who was successful using this method is George Soros, who took a now infamous position on the British pound in 1992. He shorted the pound heavily shortly before the Bank of England withdrew the pound from the European Exchange Rate Mechanism and pocketed over $1bn. This was obviously based on economic factors rather than any fancy technical indicators such as an oversold RSI or MACD crossover.
So you can definitely make big profits from long-term fundamental analysis, but if you are more of a short-term trader then there are still profits to be made. For example, you could look to adopt a strategy based on trading the economic data releases.
This is quite difficult to do, and is not something I'm particularly good at, but it is definitely possible to make profits this way. Indeed I know a few traders who trade the news releases for a living. The major announcements can create wild swings in a currency's price so there are plenty of opportunities to trade these volatile movements in price.
Finally, if fundamental analysis and technical analysis aren't your thing, then you can always use the only meaningful indicator you really need - price. After all the price history tells you how the currency has behaved in the past, and if read correctly can be used to predict future movements as well.
Related Tags: forex trading, forex, technical indicators, trade forex, technical analysis, fundamental analysis
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