By www.TheForexNittyGritty.com Technical Approach to Contrarian Forex Trading Oftentimes profits in trading foreign currencies come from taking an approach opposite to the market, a contrarian approach. After all, rallies reverse, downward trends correct themselves, and correctly anticipating when a trend will change is commonly where Forex profit lies. Traders use candlesticks patterns in Forex trading and other tools to read the markets. And, just as in all markets, trader psychology can take over. Sometimes the Euro is falling. Sometimes the Yen is rising. Sometimes the US dollar is going into free fall, all according to market sentiment. When herd psychology takes over currency prices tend to overshoot the price which fundamentals dictate. A contrarian approach at this point can be useful. A technical approach to contrarian Forex trading can be very profitable. Technical Analysis The point of technical analysis is to tap into market sentiment in order to anticipate price changes. But when market sentiment becomes overly optimistic or pessimistic what does a trader do? He may well adopt a contrarian approach to the market but he may sell or buy before a trend reverses. Here a technical approach to contrarian Forex trading is useful. A Forex trader sees that currency fundamentals do not support the price of the Yen versus the Dollar of Swiss franc versus the Euro. He will get ready to trade accordingly. However, he does not want to make his trades until the market is ready to correct. Technical analysis of Forex pairs is the key in this case. The trader follows the market, looking for reversal signals, and makes his trades when the signals as well as fundamentals dictate. And Don’t Forget the Fundamentals Fundamental analysis of Forex pairs is what tells the Forex trader that a currency has been over bought or oversold. By following the politics, monetary policy, balance of trade, employment figures and other factors a Forex trader can get a clear idea of the prices at which a currency pair will trade once market inefficiency settles out of the equation. This can be a repetitive job as fundamentals change which fact in turn changes anticipated prices and current prices. Nevertheless, a trader with no sense of market fundamentals can be lost in the market and will lose in trades when other traders use a fundamental and technical approach to contrarian Forex trading. Major Currencies Technical analysis of major Forex currencies tends to be more accurate than technical analysis of minor currencies. Likewise fundamental information can be substantially easier to get for the major than many of the minors. When market sentiment takes prices beyond what fundamentals dictate a technical approach to contrarian Forex trading can be more accurate and more profitable in trading major currencies than minor ones.

2. Oftentimes profits in trading
foreign currencies come from
taking an approach opposite
to the market, a contrarian
approach.

3. After all, rallies reverse,
downward trends correct
themselves, and correctly
anticipating when a trend will
change is commonly where
Forex profit lies.

4. Traders use candlesticks
patterns in Forex trading and
other tools to read the
markets. And, just as in all
markets, trader psychology
can take over.