Forex learn to read charts and make profits

When analyzing a currency pair for the first time, look for the current trend. Start with long-term charts (monthly, weekly, and daily) from years ago. Since these charts contain more data, they can provide a clearer picture of the currency pair’s movements than short-term charts (hourly, half-hourly, 15-minute or 5-minute). The extra data also makes what the metrics tell you more reliable.

Identifying a trend is simple: just look at the chart and determine if the chart is rising more than falling, or falling more than rising. Trends can be steep or shallow, spanning years or just a few weeks. Practice identifying them and finding the point where they change direction. Long-term trends are strongest, which is another reason to look at these charts in the first place.

Even if you are scalping or day trading and don’t plan to hold your position for more than an hour, you can do better by trading in the same direction as the current trend. So at least take the time to identify it on the daily chart before you start. An old trader said: The trend is your friend. This is not a lie.

Once you’ve identified a trend on the long-term chart, compare it to what you see on the short-term chart. You will find that in the path set by the current trend, there may be any number of short- to medium-term trends. The chart will go up and down, but overall, it will follow the path set by the long-term trend.

Next, find the support and resistance levels, which are the lowest and highest points on the chart, respectively. These are the key points on the chart where price repeatedly refuses to break out or just peeks and gives up the fight. The price will go up this high or this low, but not any more; it gets to that point and changes direction. The more it happens, the stronger the support and resistance.

Draw a line in your mind or on the chart through most of the support points. Then draw another one that goes through most of the resistance points. This gives you an idea of ??the path followed by the currency pair’s trend, known as a price channel, which is a simple but powerful tool to help determine how that path will continue.

When support and resistance are strong, the currency pair’s chart appears to bounce sideways like a pinball between these two lines. When this happens, the currency pair is said to be range-bound. Since this happens 80% of the time, many just trade within the channel, although this technique does not result in any jackpots.

The lines do not have to be horizontal. Sometimes the currency pair is trending up or down, but still moving within the channel. Regardless of its tilt, you can still trade within that range. When a currency pair breaks out of a price channel, it sometimes falls back into the channel, sometimes it gains momentum and continues to move. The last is called a momentum market, and it’s another way of trading ranges: place an entry order for a price breakout, either above or below the channel, and sit back and let it go.

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