When it comes to forex chart analysis, it can be costly if you did not do it right. Forex trading is something that requires you to conduct proper forex technical analysis before you put in your precious hard earned money on a trade. Therefore being able to do good forex chart analysis can definitely increase your odds of winning.
Here are some forex tips for you when doing forex chart analysis:
1) Set Your Time Frame: First of all, you need to know exactly what type of trade you want to take. You need to understand whether you are going to be a scalper, day trader or position trader and this alone will determine the type of time frame you are going to use. For a scalper, you need to use only the lower time frames like the 1, 5 and 15 minutes charts. For a day trader, you need to use only the 15 minutes, hourly and daily charts and for position trader, you need to use the higher time frames like the hourly, daily and weekly charts.
2) Do Top Down Chart Analysis: This is by far one of the most important chart analysis tasks that all forex traders must do. Top down chart analysis involves the reading of charts from the highest time frame to the lowest time frame. This is to give you a better trend overview for the currency pair so that you can ride the trend to profit. One advice to new trader is to avoid counter trend trading which can be costly.
3) Get Technical: Once you established the trend on the higher time frame, you need to analyze the indicators on the lower time frame to determine the setup you want to trade with. You need to know whether the market is currently overbought or oversold and whether there is any divergence happening on the MACD indicator and so on.
4) Entry Position: Once you got the above 3 steps done, you should then move to the lowest time frame chart to wait for an entry signal. It can be a trend line break or parabolic flip that trigger your entrance.
Basically, these are the 4 basic forex chart analysis steps that I use in my trading and have proven to be very useful. Spend some time to go through these steps and put them to practice in your trading today. If you are looking for more information on various forex indicators and how to use them, you can take a look at the forex indicator section of this blog.