Technical Trading Tips and Techniques by 
A quick note about the important role of the “self-fulfilling prophecy” in forex trading and technical analysis. One of the key reasons that many aspects of technical analysis, especially such important concepts as support and resistance, often seem to work remarkably well has to do with this phenomenon. A self-fulfilling prophecy is a forecast that causes itself to become true. In the case of forex trading and technical analysis, a certain support/resistance level may be valid and respected to a significant extent simply because that level is well-known, and is therefore watched and acted upon by a critical mass of traders. So, for example, a 38.2% Fibonacci level, an R1 pivot point, and a key uptrend support line do not in themselves really have magical predictive properties. It is more the fact these these levels are so universally accepted and therefore so closely watched and traded by so many traders, that they often take on considerable price action significance. The role of the self-fulfilling prophecy is one of the keys to effective technical analysis in the forex market as well as all other financial trading markets.
- James
James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading