There are countless traders who use technical analysis, but only a smaller number actually succeed in online forex trading. Statistics provided by brokers prove that the vast majority of traders (somewhere between 80-90 percent) end up losing money. Yet the definitions of technical analysis, and its tools, are all really straightforward and simple. No one has great trouble understanding what the RSI or the moving averages, for example, are doing on the charts. But there appears to be a great problem that somehow prevents their effective use for profit by many traders. What is the reason?

First of all, let’s understand that a majority of forex trader don’t have a clue on what they are doing. Many of them have been lured by tall tales of unlimited riches overnight, or are simply convinced that forex trading is like performing a math calculation. They come, do what they deem to be the right thing, and then naturally, leave with large losses. Even more are burdened by an inappropriate emotional mindset that prevents a disciplined and consistent approach to trading, which are absolute necessities for success.

But most importantly, many practitioners of technical analysis fail to recognize that technical analysis is not about predicting anything, but merely creating precise goals in take-profit and stop-loss orders which will systematize our trading and let us execute our plans in an effective manner. Technical analysis does not predict future events, nor does it claim to do so. Our purpose is to create our own scenarios by using the tools of analysis, then enter positions with such a risk/reward profile that our profitable trades will cover our losses and let us make a net profit in our account.