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5 Important Steps When Reading Forex Charts

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Learning the essential skills in Forex, such as reading Forex Charts, is really important. This is so because once you secure this vital skill in Forex trading under your belt; it will be a lot easier and to make money in the Forex Market.

This article will help you learn how to read Forex Charts. Also, it will help you to know the pitfalls that sometimes occur when reading the Forex Charts especially for newbies.

1. When you buy a currency pair, you should look at the chart of that pair to go up so that you can make a margin on your trading. You hope that the base of the currency pair will strengthen against the terms currency. On the flip side, if you sell the currency pair then you should be looking for the chart to go down so that you can benefit. This means that you are hopping that the base currency will weaken against the terms currency. Forex trading is all about buying and selling of currencies and thus you need to be keen on how the chart moves so that you can generate some money from the trade.

2. Secondly, make sure that you always check the displayed time frame. Most of the trading systems usually use various time frames to establish the entry of a trade. Some of the indicators that are used to determine overall trend of a currency pair are momentum, Moving Averages Convergence and Divergence (MACD), support and resistance lines.

Before starting to trade, it is recommendable that you ascertain that the chart you are looking at has the right time span for your analysis. Set up charts with the right time frames and indicators on them for the trading system you are working on. You can save and even reuse this layout in your consequent trading.

3. Most charts display the bid price. But it is good to bear in mind that a price has a bid and an ask price (the ask price is usually higher than the bid price). So when you make a purchase, you do it at the ask price and when you sell then you sell at the bid price.

When you use a chart price in determining the entry or exit of a trade then it is important to know that when you want to sell and the chart price indicates 1.220 then this the price you will set at if there will be no slippage. On the flip side, if you want to buy when the price chart is indicating the same amount, you will actually buy at a higher price than the one indicated. But this is not always the case because the Forex system will determine whether you will add a buffer in your trading or you will just follow the chart price.

There is always an option to stop orders when the prices falls below a certain mark when selling or rises over a certain amount when buying. This is necessary ton protect your interests to mitigate the risks involved in your trading.

4. It is good to know that the times shown on the Forex charts are not standard but it depends on the time zone of the Forex charts provider, it can be New York, GMT and so forth. It is thus advisable that you have a world clock on your machine so that you can convert the various time zones to your time zone. This is especially so when you are waiting for important economic announcements that will affect the value of currency you want to trade in.

5. Always check the time on the Forex charts with correspondent with candle opening or closing. This is because if you are planning to either enter a trade or exit after a major economic announcement, then you need to be precise and to the point. You do not want to be blocked because you delayed with a few minutes, you need be exact. The trade usually witnesses a turnaround immediately after the announcement and not the candle afterwards. Time is of paramount importance at this juncture.

I believe now you have all the essential steps on how to read Forex charts appropriately. Implement it accordingly to avoid pitfalls usually witnessed by newbies in Forex trading. It will also help you to make big steps in your trading within a record time!!!

Now that you know this, get to it!

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As we all know that we can can trade in Forex market 24/7, can you please tell me what is the good time in a day to trade forex when the lots of traders doing trading simultaneously ? (EST, Asian Time or European time)

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