| Learning the basic skills in forex, such as how to read | | | | offer). When you buy, you buy at the ask, which is |
| forex charts, is really important. | | | | the higher of the 2 prices in the spread, and when |
| This is because once you have this vital skill under | | | | you sell, you sell at the bid, which is the lower of the |
| your belt, it will be a lot easier and quicker when the | | | | two prices. |
| time comes for you to learn and practice an actual | | | | If you use the chart price to determine an entry or |
| forex trading system. | | | | exit, realise that when you place an order to sell |
| By the time you finish this article, you'll learn how to | | | | when the chart price is say 1.330, then this is the |
| read forex charts, as well as know the pitfalls that | | | | price that you'll sell at assuming no slippage. |
| can occur when reading them, especially if you | | | | If on the other hand, you place an order to buy |
| haven't traded forex before. | | | | when the chart price is the same price, then you'll |
| Firstly, let's revise the basics of a forex trading as | | | | actually buy at 1.3333. A forex system will often |
| this relates directly to how to reade forex charts. | | | | determine whether your orders will be placed simply |
| Each currency pair is always quoted in the same way. | | | | according to the chart price or whether you need to |
| For example, the EURUSD currency pair is always as | | | | add a buffer when buying or selling. |
| EURUSD, with the EUR being the base currency, and | | | | Also note that on many platforms, when you're |
| the USD being the terms currency, not the other | | | | placing stop orders (to buy if the price rises above a |
| way round with the USD first. Therefore if the chart | | | | certain price, or sell when the price falls below a |
| of the EURUSD shows that the current price is | | | | certain price) you can select either “stop if |
| fluctuating around 1.2155, this means that 1 EURO will | | | | bid” or “stop if offered”. |
| buy around 1.2155 US dollars. | | | | 4. Realise that the times shown on the bottom of |
| And your trade size (face value) is the amount of | | | | forex charts are set to the particular time zone that |
| base currency that you're trading. In this example, if | | | | the forex provider's charts are set to, be it GMT, |
| you want to buy 100 000 EURUSD, you're buying 100 | | | | New York time, or other time zones. |
| 000 EUROs. | | | | It's handy to have a world clock available on your |
| Now let's have a look at the 5 important steps on | | | | computer desktop in order to convert the different |
| how to read a forex chart: | | | | time zones. This is important when you're trading |
| 1. If you buy the currency pair, that is, you're long | | | | major economic announcements. |
| the position, realise that you're looking for the chart | | | | You'll need to convert the time of an announcement |
| of that currency pair to go up, to make a profit on | | | | to your local time, and the chart time, so you'll know |
| the trade. That is, you want the base currency to | | | | when the announcement is going to happen, and |
| strengthen against the terms currency. | | | | therefore when you need to trade. |
| On the other hand if you sell the currency pair to | | | | 5. Finally, check whether the times on your forex |
| short the position, then you're looking for the chart | | | | charts corresponds to when the candle opens or |
| of that currency pair to go down, to make a profit. | | | | when the candle closes. Your charting software may |
| That is, you want the base currency to weaken | | | | be different to someone else's in this way. |
| against the terms currency. | | | | The reason I mention this, is that if you need to |
| Pretty simple so far. | | | | trade major economic announcements, either by |
| 2. Always check the time frame displayed. Many | | | | entering a trade based on the movements that |
| trading systems will use multiple time frames to | | | | happen after the announcement, or to exit a trade |
| determine the entry of a trade. For example, a | | | | before the announcement in avoid getting stopped |
| system may use a 4 hour and a 30 minute chart to | | | | out during it, then you need to be precise (to the |
| determine the overall trend of the currency pair by | | | | minute!) as these trades are performed according to |
| using indicators such as MACD, momentum, or | | | | what happens at the 1 minute immediately after the |
| support and resistance lines, and then a 5 minute | | | | announcement, not the candle afterwards! |
| chart to look for a rise from a temporary dip to | | | | So there you have it. |
| determine the actual entry. | | | | You now have the 5 essential keys to how to |
| So ensure that the chart you're looking at has the | | | | properly read forex charts, which will help you to |
| correct time frame for your analysis. The best way | | | | avoid the common mistakes which many forex |
| to do this is to set up your charts with the correct | | | | beginners make when looking at charts, and which will |
| time frames and indicators on them for the system | | | | speed up your progress when you're looking at forex |
| you're trading, and to save and reuse this layout. | | | | charting packages, and forex trading systems that |
| 3. On most forex charts, it is the BID price rather | | | | you want to trade! |
| than the ask price that's displayed on the chart. | | | | Now that you know this, practice looking at forex |
| Remember that a price is always quoted with a bid | | | | charts with each of these 5 points in mind. |
| and an ask (or offer). For example, the current price | | | | So get to it! |
| of EURUSD may be 1.2055 bid and 1.2058 ask (or | | | | |