Profit With Currency Trading Charts

An crucial part of a forex traders success relies on the skill to precisely and swiftly

understand technical data which is represented by one or more forex trading charts. Regardless of what is being traded, it can be fx, shares, commodities or any derivative instrument, it is essential for traders to carry out analysis prior to placing a trade. This analysis can be technical or fundamental or a combination of both

Technical analysis concentrates on historical information to look for and recognize patterns that help traders to try and predict what is probable to happen in the future. This historical info is displayed as a chart and can be set up to present all kinds of pertinent data. Analysts and traders who consider themselves technical analysts and traders first and foremost employ pricing charts as their principal tool for collecting data and formulating their existing and future strategies.

Trading charts can be used to view trading data over many different timeframes depending on the style of trading the client is using. For example a day trader may only be interested in configuring a chart to show a single days data and have the chart show time periods of anything from seconds to minutes to hours.

On completion of the initial set up of the pricing chart, it should now be displaying the currency in the time frame needed by the user. It is from here that the technical analysis can be started. Of the numerous different technical indicators which are in use today, they generally fall into these categories:-

1) Volume Indicators

2) Momentum Indicators

3) Moving Average Indicators

1) The volume that is traded during a period can indicate the strength of backing for a price move and if it will actually hold. This indicator is helpful when trying to verify a possible price trend and normally when a trader or an analyst refers to volume they are talking about the OBV or 'On Balance Volume'

2) Mostly speaking momentum is used to evaluate the strength of specific trends which can help work out how long and far the trend will continue. It is broadly accepted that the most useful momentum indicators are the Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD) and Stochastics. Here the analyst must look at the overbought and oversold regions of the chart and concentrate on the divergence concept.

3) A moving average indicator is useful when it is placed on the chart as it shows trends due to the smoothing effect of the averages being used.

This is only the beginning of the depth of technical analysis that can be performed using trading charts but you can see why many forex traders spend a great deal of time learning the different technical indicators, how to interpret them and ultimately use them to guide their trading decisions.

To complement the technical side to trading is fundamental analysis which focuses on exterior influences that may well affect fx prices Fundamental analysis seeks to evaluate the impact that chief financial and economic announcements and decisions will have on the fx market. Of special interest is anything originating or concerning the U.S, UK, Eurozone countries, Japan and China. Fundamental traders would pay particular interest to interest rate decisions, central bank announcements, national employment statistics and GDP just to name a few areas of interest. Scheduled or expected decisions such as these usually impact the fx market but often unplanned events can have a larger effect, such as terrorist attacks or natural disasters.

The importance of currency trading charts is obvious to anyone attempting to incorporate technical analysis into their trading however it is a mistake to rely on charts alone to trade forex as fundamental analysis highlights the outside factors that influence forex movements. There are those people out there who claim they are a purely technical trader or a purely fundamental trader however if you want to make forex trading a profitable and lasting endeavour then you must learn to use trading charts thoroughly and effectively and then place into context your findings with fundamental analysis. Rely solely on price charts at your peril, you have been warned.

by: Dan Jones

POST COMMENT

Gain Supplementary Marketing Points With Imprinted Shoes And Sandals You Will Fail In Any Online Affiliate Marketing Program Without These How To Advertise A Profitable Catering Company Text Message Marketing - A Growing Market Louis Vuitton Replica Bags - Tips For Finding The Best Bags In The Market Steal Pips Scam How To Choose Bridal Dresses To Put Up For Sale For The Greatest Profit Increase Your Profits with E-commerce website development Why Social Media Marketing is Needed The Essential of Social Media Marketing Grow Rich Series 3 As An Affiliate Marketer – 5 Fold Increase To Quick Success! The Unconventional Oil and Gas Market Outlook: The future of oil sands, shale gas, oil shale and coalbed methane Relationship Marketing 101: Blogging And Inbound Marketing