About Technical Analysis:

I have heard people lament how difficult it was to perform technical analysis and how they can never learn the skills. There were also many critics or fundamental believers that the stock market can never be timed and that we market technicians are wasting our time trying to beat the market using technical analysis. Technical analysis was thought to be a study of past price behaviors and critics were saying the past doesn't reflect what will happen in the future. They are both right and wrong. They are right because technical analysis is not a crystal ball where it is 100% accurate. They are wrong because technical analysis reflects the human emotions happening on the charts. Do human change over the centuries? As far as emotions are concerned, fear and greed are human nature that will never change! Humans will still do insider trading even if it is illegal due to greed. We saw how corporate governance though tightened over the decades was not fool proof to these criminals. Humans will still fear losing paper profits and they will still fear declining stock prices leading to declining capital. All these emotions can be found on the charts as they happen. Ask yourself, how many times have you seen a stock price run up before news is released? Anticipation of shareholders? Well, maybe but how about insider leaking the news? Think about it.

Every night I study in details charts and it is through all these relentless efforts that I became very familiar with technical analysis. If a lawyer wants to win a case, he will study the case carefully and also refer to past cases. We all know lawyers earn big money, but it is really this hard work of preparation that justifies their huge pay. As a trader, we cannot slack too. Hard work and efforts must be put in to learn technical analysis. Long hours of studying these charts will enable us to be very proficient in chart reading and recognize buy or sell signal in a flash as the experience build up. There is no shortcut to success in trading as far as I'm concerned.

I started trading as a loser and often times am only interested to know which the next stock to buy is. This is not why legends made their fortune in the stock market. Every single book that I read, advocate us to study past charts and get familiar with all the chart patterns or price/volume relationship. Hence why shouldn't we follow? After all, they are the ones who have done it and been there.

Technical Analysis Can Help You Trade Better In Forex Trading:

As a beginner there are two types of trading strategies you can adopt. The strategies are fundamental analysis and technical analysis. Technical analysis is a great tool to trade in the market and achieve success but I have always almost heard that people say that they had tough luck with charting tools and technical analysis software.

The truth is that you should know how to use the software effectively and then you can achieve success with the technical analysis. There are errors that people make which makes them think that technical analysis is not helping them.

The basic error traders make is that assuming that technical analysis will help them reach answers to what is the price is going to be. That is not going to happen, the technical analysis will always tell from the price trends and the historical trading patterns that yes at this level there will support and there may be levels where you can buy or sell. Never assume that there is going to be a price prediction. Use accurately the technical analysis and you will be making an informed decision about the prices. Also, make sure that you use breakout to your advantage and trade accordingly to make money.

Technical analysis software help you guide easily through these issues but then as with computers you need human intelligence to decipher the data presented. So if the technical analysis software tells you a thing then make sure that you apply your intelligent guess on top of it. That way you will be reasonably sure that you will profit from the technical analysis.

As always the best strategy is to keep it simple when comes to using indicators. Stick to basic indicators and you will be on track. Use 5 or 6 or ten indicators and you will be confused as to what is happening to the charts at any given point in time.

Forex charting is simple tool to help you benefit but do not bend it to suit your decisions and never try to evaluate your past strategies from the forex charting. This is known as curve fitting and it will do more harm than good. There are guide available for giving you help on how to read the charts and also how to use them as excel based plug ins.

Forex Options Market Overview

The forex options market started as an over-the-counter (OTC) financial vehicle for large banks, financial institutions and large international corporations to hedge against foreign currency exposure. Like the forex spot market, the forex options market is considered an "interbank" market. However, with the plethora of real-time financial data and forex option trading software available to most investors through the internet, today's forex option market now includes an increasingly large number of individuals and corporations who are speculating and/or hedging foreign currency exposure via telephone or online forex trading platforms.

Forex option trading has emerged as an alternative investment vehicle for many traders and investors. As an investment tool, forex option trading provides both large and small investors with greater flexibility when determining the appropriate forex trading and hedging strategies to implement.

Most forex options trading is conducted via telephone as there are only a few forex brokers offering online forex option trading platforms.

Forex Option Defined - A forex option is a financial currency contract giving the forex option buyer the right, but not the obligation, to purchase or sell a specific forex spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the forex option buyer pays to the forex option seller for the forex option contract rights is called the forex option "premium."

The Forex Option Buyer - The buyer, or holder, of a foreign currency option has the choice to either sell the foreign currency option contract prior to expiration, or he or she can choose to hold the foreign currency options contract until expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of exercising the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is known as "assignment" or being "assigned" a spot position.

The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires.

On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option's strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option's strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration.

Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency option is "out-of-the-money" if the underlying foreign currency spot price is lower than a foreign currency call option's strike price, or the underlying foreign currency spot price is higher than a put option's strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.

The Forex Option Seller - The foreign currency option seller may also be called the "writer" or "grantor" of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.

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