There is one very important thing you have to be skilled at if you hope to be a successful forex trader – chart forex trading. Sounds a bit unfamiliar, but it simply refers to technical analysis. It’s one of the methods of forex analysis, the other being the fundamental method. Trading using the latter is often referred to by traders as forex news trading.
Technical analysis is done basically with the assistance of forex indicators, which you have to be familiar with. There are a lot of indicators and many will present data of currency movements via charts and graphs. The charts will provide opening prices of currencies, lows and highs and closing prices. From these data you can detect whether there is an existing trend or one is forthcoming. Being able to detect future currency movements offers you the best opportunity for making trades that have better than good chance of earning.
As already mentioned there are plenty of indicators. The usefulness forex charts will depend on what aspects of currency movements is presented by a particular indicator. If a chart does not help you identify good trade entries and exits, then you can positively say that the indicator is useless. You want an indicator which presents the data you need in an easily understandable format and from which you can predict currency movements. Anything less is a waste of time and money.
Among indicators and forex charts that are currently in use, the most popular is the Japanese candlestick. Developed by the Japanese a long time ago, the candlestick provides the most comprehensive data of what’s going in the market. What’s more you do not have to beat your brains out in order to understand what the candlestick is saying.
The candlestick will have representations of just about any market condition. There’s one for bullish and bearish market, and for prices of currencies opening and closing at virtually the same position. There’s a candlestick which signals a possible market rebound after a decline. There’s a candlestick comparing movements in different days. All these candlesticks help you understand what’s happening in the market at any given time and this understanding is your most valuable asset in ensuring viable trades.
The ability to identify trends and movements reduces risks and increases your chance of earning from forex, but you need serviceable indicators accompanied by readable charts that will help you analyze market tendencies better.