Forex Charting

Forex charting is your personal window to the foreign exchange markets.

Forex charts allow you to visualize the massive amounts of currency data rather than watching the price through a ticker tape like they used to do years and years ago. But forex charting is really an art, not a science. If you looked at the charts of 100 different currency traders, you would see 100 different chart setups. So how do you know which forex charting setup is the best and which one should you use? Well, let’s look at the answer to that.

One constant that you want in your forex charting is price.

You can watch the price through a line chart in which you only see the closing price of each time period. You can see the price through a bar chart. A bar chart shows you the open, close, high, and low of each time period. Or you can look at the market price through a candlestick chart which is very similar to a bar chart.

I prefer the candlestick or bar chart personally because I can see so much more information at just a glance. The great news is that any trading platform offers all three options, and you can change from one option to another at the click of the button.

Any decent forex charting package will allow you to add several indicators to your charts.

Now you have to be careful because this is where some forex traders get carried away. They think that the more indicators they have on their forex charts, then the better chance they have at making money. This is absolutely wrong.

At the most you need 2 – 3 indicators when trading the currency markets. Indicators don’t make you money. How you interpret those indicators is what makes you money. So you need to choose a handful of indicators that are relatively popular and that you feel comfortable with and trade with those.

Here is a look at some of the most common indicators:

1. Moving averages – moving averages are another way to view the market price. Prices tend to jump around quite a bit and it can sometimes be hard to see market trends. Moving averages smooth the price out so that you can easily see which way the market is going.

2. Moving average convergence divergence (MACD) – don’t let this name scare you. The name might sound complicated, but the indicator is quite simple and very profitable when used properly. The MACD is basically moving averages of moving averages. How does this help you make money? Well, if the recent moving average has just crossed an older moving average, it is an indication the market has changed direction. If you trade in the new direction, chances are pretty good you will make money.

3. Relative Strength Index (RSI) – again, don’t be put off by the name. The RSI is simply another way to gauge which way the market is moving. If the RSI indicator crosses certain boundaries, it is an indication the market has changed direction.

Forex charting is a very personal matter, and you will definitely find your own comfort level pretty quickly. Just don’t get carried away by adding indicator after indicator, and you will more than likely do just fine.

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