Today we will consider the underlying theme of how to read the current charts of the currency market correctly. This knowledge will bring practical benefit to the trader.
Correct Forex forecast consists of full implementation of the rules of the selected method of earning. First of all, you need to perform a complete graphical layout. You can use it together with any working system and forex advisor as an auxiliary tool to confirm or deny the decisions made.
Attention! The proposed algorithm is considered to be a basic one, so it can be supplemented and adjusted if desired. To maintain the latest data trader must repeat all actions every week.
One more nuance: in the example below, we will consider the mark-up for medium and long-term strategies (from 1 hour to 1 month). If you use shorter periods in your practice, then follow the same sequence, but instead of a month, use the daily timeframe as a starting point.
Step 1 - get acquainted with the chart
Look at the proposed drawing. This view has a standard trading program, where all profitable strategies in Forex are implemented.
Black and white candlesticks are market units that show the behaviour of all participants in a selected period:
You can see that all candles are continually changing their direction: going up, down or standing still. This is called a market trend, which is increasing, decreasing and sideways.
The right vertical area reflects price levels that pass the chart. The highlighted mark always shows the current price that a trader can navigate.
The lower horizontal area shows a window with the name of the selected currency pairs. A little higher is the time interval during which the candle was formed.
The upper horizontal part is called the work area, which contains all the necessary elements. To fully understand all the options, you will need to allocate 30 minutes of free time for training.
You can already read the charts correctly and give an initial assessment of the situation. However, to consistently receive quality signals, you need to add auxiliary elements.
Stage 2 - Find Power Levels on a Monthly Period
To make money on hourly charts, a trader must see the overall market picture, understand what the trend is, when there may be a period of correction, rollback, breakout, etc.
You need to work with information that reflects the current situation. We are not interested in deep history.
Tip: To quickly learn how to read charts, assign a different colour to each timeframe (applied lines). This way, you can instantly navigate which level is older, which is more important, and which level you can ignore.
Step 3 - Determine power levels at intervals from weekly to hourly
Step 4 - Add flexible support/resistance levels to the chart
(Moving Average with periods 200; 100; 50)
On the way of price movement, there was a robust monthly level (blue line) from which the price rebounded and stopped at the hour yellow line.
The moving averages have settled down above the price. Therefore, the established downtrend operates in the market. Attention! According to the basic rules of technical analysis, only sell during this period is allowed.
To increase efficiency, it remains to choose a profitable strategy and learn to evaluate the main economic events. However, it is already clear that the trader should refrain from buying and wait for the right moment to enter the sales.
Now you know how to read Forex charts. Moreover - how to create technical mark-ups yourself that will facilitate the process of any online operation. Right now open the trading terminal and consolidate the knowledge you have gained. Do it even if you do not intend to use auxiliary technical tools in the future in practice. This exercise will help you better navigate the mechanics of the market. Trade correctly and practice more. Success!