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Currency Technical Analysis Part 1: The Most Important Theory
Ever
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Currency Technical Analysis Part 1: The
Most Important Theory Ever
In currency technical analysis, the most important theory
ever, for understanding market movement, is Dow Theory - but
its influence is vastly under estimated by the bulk of traders.
The reasons why every trader (not just currency traders)
should look at Dow Theory, and understand it, is the basis of
this article. Understand Dow Theory correctly, and incorporate
it in your trading strategy – then watch your profits soar.
Predictive Theory V Odds Theory
Many traders look for theories that predict - as they think
making money is easy. Of course if they stopped to think about
it, they would realize that if predictive theories worked, we
would all know the market price in advance - and there would
be no market!
Losing traders love theories, such as Elliot Wave, and Gann
- which are supposed to scientifically predict market movements
in advance - which of course they can’t.
So, forget about joining the far out investment crowd, and
traders looking for easy money. Lets look at currency technical
analysis with Dow theory - and gain a greater insight into market
movement, that can lead to big profits.
In 1901, when writing in the Wall Street Journal, Charles
H. Dow compared the stock market, to the tides of the ocean,
- and the quote below neatly sums up the theory:
"A person watching the tide coming in and who wishes
to know the exact spot which marks the high tide, sets a stick
in the sand at the points reached by the incoming waves until
the stick reaches a position where the waves do not come up
to it, and finally recede enough to show that the tide has turned.
This method holds good in watching and determining the flood
tide of the stock market."
Probability is the Key to Currency Trading Success
Like the waves of the ocean, we all know that tides ebb
and flow (come in and go out) - but we don’t know the exact
spot, or the exact timing - we wait for confirmation.
Dow Theory is a theory of currency technical analysis that
doesn’t predict - but gives us a chance to put the odds in our
favor.
Just as waves don’t move to an exact scientific theory,
neither do markets - but they do move in recognizable patterns
- and with currency trading technical analysis, this is what
we need to do - spot the patterns with the best chance of success,
and trade them for profit.
The basis of currency trading technical analysis lies in
getting the odds in our favor - not scientific prediction.
The Development of Dow’s Thoughts
Dow theory has been around for almost 100 years, and even
in today's markets, the basic components of Dow theory remain
valid. Dow theory not only addresses technical analysis, and
price action - but also market philosophy.
Dow theory as set down by Dow himself, was later developed
by two important analysts - Rhea and Hamilton, who take enormous
credit for developing Dow theory, and bringing it to a wider
audience.
Why is Dow Theory So Significant?
In today’s world of trading, many traders think that trading
is easy – vendors, who peddle predictive theories, and easy
ways to make money, perpetrate this hype.
However, even with the huge advances in computers, and the
data crunching available today, there is no way of predicting
the market - and their never will be.
Dow theory though, gives any sensible trader, a great form
of currency technical analysis, which can get the odds in their
favor.
We will cover the basics of this important currency technical
analysis theory in part 2 of this article - where we show you
how you can use the theory to enhance your profit potential.
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An Easy Way to Make Money With EBooks
If you've been around the web for any time at all - especially looking for information about how to get your own online business started - you've probably heard one thing metioned time and time again: Make and sell your own products. It's an undeniable fact. Selling your own product is the fastest, and sometimes easiest, way to make money online. And one of the easiest types of products to sell...
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