Forex Trading Charts - Nothing Else Matters

Forex Trading Charts - Nothing Else Matters

by Harold Hsu

Many Forex traders like to obsess over economic announcements and fundamental analysis. While these are indeed important aspects to pay attention to, many traders tend to forget that at the end of the day, the only thing that really matters is what the charts are telling them.

Fundamental Analysis?

It makes logical sense to trade according to the recent economic happenings and general market sentiment as published in the news. Currency analysts often try to predict where certain currencies are headed: Is the U.S. dollar going to keep depreciating? Or is it going to turn around soon?

I know this may sound contrary to common knowledge, but as good Forex traders, we really shouldn't care about what currency analysts think. Please allow me to explain why.

Analysts Aren't Traders

This may seem blatantly obvious, but you'd be surprised at how often people tend to forget this fact. Without trying to discredit any currency analysts (I still love them!), you'll do well to remember that at the end of the day, currency traders are the ones that put their money where their mouth is; not the analysts.

Analysts WRITE about what they think is going to happen, but it is the traders that TRADE with their money on the line. If I had to take trading advice from someone, I'd rather take it from a profitable trader, not an analyst or news report.

Why Not Always Listen To Analysts?

Again, I want to stress that currency analysts do have their place in the Forex market... it's just that they're not good trading advisors.

You see, in the market there are typically 2 aspects of trading:

1. Economic News / General "Market Sentiment"

2. Actual Market Price Movements / Actual Reactions To Economic News

The first aspect is what the market analysts specialize in. They're good at discussing the theoretical side of currency movements. They talk about how currency prices SHOULD move in relation to recent news.

The part they don't cover too well however, is the second aspect. When it comes to the practical application of analyzing ACTUAL currency movements in response to news, they tend to fall short.