The Currency Trading Chart - An Essential Tool

Fx price charts are broadly relied upon when a trader or an analyst needs to to extract technical information encompassing a trading decsion. No matter what the instrument you are trading, whether its stocks, commodities, (most) derivatives, indices or forex you need to perform technical analysis or fundamental analysis or a combination of both on your trades if you are ever going to be successful and move away from trading as just a form of gambling.

It is no surprise that technical analysis concentrates on the technical factors influencing the price movement, factors that are
defined and can be measured.

Due to huge volumes of data involved in detailed technical analysis the most appropriate way to present the information is using
a trading price chart. Traders that emphasize technical analysis in their trading strategy trust heavily on charts as their principal
source of information and will work really hard to identify patterns in the charts to indicate winning trades.

Ordinarily a chart is set up to the requirements of the trader or analyst using it. A traders strategy may well focus on the 12 hour
timeframe in which case a chart can be set to show that amount of information, alternatively it could just as simply be set for 1
day or longer. For example a day trader may only be interested in configuring a chart to show a single days data and have the
chart show time periods of anything from seconds to minutes to hours. So charts can benefit traders whatever their specific strategy may be, both short and longer term.

So the fx chart is now displaying the correct time intervals to to be useful to the technical traders strategy. This is just the starting point from which the relevant data has to be looked at and analysed. Technical indicators help discover 3 general factors that influence a currencys' behavior :-

1) Volume Indicators

2) Momentum Indicators

3) Moving Average Indicators

1) Volume indicators focus on the volume of currency traded in a certain period and how strong or weak the backing is for a price move. Volume can be used to confirm a price trend. Typically when a trader or an analyst refers to volume they are talking about the OBV or 'On Balance Volume'

2) Indicators that are associated with momentum quantify the strength of a trend of which the most commonly used momentum idicators are the (MACD) which is the Moving Average Covergence/Divergence, Stochastics and the Relative Strngth Index (RSI). Here the analyst must look at the overbought and oversold regions of the chart and concentrate on the divergence concept.

3) The moving average calculates price demand averages and is an effective trend following indicator.There is a lot more associated with technical analysis and it can take months and years for traders to become competent in this area of trading.

Fundamental analysis on the other hand looks at the current and future events that may have an impact on the currencies in question. The primary tool used here is the economic calender, a list of dates when important financial decisions and statements are made by people of significant influence mainly that of the USA, Eurozone, UK and Japan. Fundamental traders would pay particular attention to interest rate decisions, central bank announcements, national employment statistics and GDP just to name a few areas of interest. All of these influence the foreign exchange market either directly or indirectly as well as other significant events like natural disasters, terrorism and war.

Many traders view fundamental analysis a smaller part of their overall strategy and place more emphasis on technical trading
and the use of the currency chart. Some traders trust solely on charts and technical analysis and some that are entirely fundamental, making decisions based on current information they read in the press, on the web and the T.V. etc.

However to increase trading success all information must be considered when trading unless a trader is using software that reacts fast enough to the market as to render obsolete the traditional trading methods. Rely solely on fx charts at your jeopardy.


Dan Jones has been involved in the forex industry for the past 7 years and knows exactly what it takes to become a successful trader. To find out more about using currency trading charts visit http://www.winningforexrobotreviews.com