Forex Charting

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4 Helpful Tips for Forex Charting

Regardless of what information is contained in them, charts can make the presentation of data more organized and attractive. Life would simply be less orderly without charts. That`s also true in the world of Foreign Exchange trading. The practice of forex charting provides an excellent means for sorting out a ton of data related to the buying and selling of foreign currencies. Here are some steps to help you read and use Forex charts:

Step 1: Examine the details of the 15-minute chart.
In particular, you should look for certain things when reading forex charting. Note the lows and highs since the time of Greenwich Mean Time (GMT) 00:00. Examine the current trend. Note the tops and bottoms throughout a complete time period of three days. And observe the current price as it relates to the 60 period SMA, or Simple Moving Average.

Step 2: Read hourly charts in order to understand the big picture.
This will provide you with an overview of the movement of nations` currencies. Besides having information regarding the details of such trading involving, it`s also critical to see how particular monies are trending. In particular, you should observe major support levels and resistance levels that fall within the range of 2% of the current day`s opening rate.

Step 3: Determine the big picture and then verify it.
This is the next important step when using forex charting. First, you should scan the hourly chart in order to get the “big picture” - whether the trend is moving in an upward or downward direction. Next, you`ll need to conclude whether the 15- minute chart verifies the trend that the “big picture” is indicating.

It`s crucial to realize that two trends always exist. There`s the major (or “prevailing”) trend, as well as a minor trend. You can see minor trends on 5-minute charts. Unlike the major trends, minor trends only last for a minor timeframe.

Step 4: Use the 5-minute chart to learn the current trend.
This will help to determine either the major trend or the minor trend. Based on the current price located below or above the 60 period SMA; and the sloping of the moving average line, you can determine both the minor and major trends.

Step 5: Act (or don`t act) based on the information you have.
After collecting and assessing the data via forex charting, you should decide which action to take. In most cases, the wisest time to buy is after a lengthy and major decline occurs while the bottoms are increasing. By the time that a third or fourth greater bottom occurs, the bottom has positioned itself and an upward movement will later occur.

Step 6: Be cautious when trading against the major trend.
There will also be times when you should trade against the current trend. When you do that, wait until you get an indicator of a buying or selling point that is nearby the bottom or top.

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