This article looks at the different features of forex charts and the mistakes traders make when using them.
There are various reasons why new traders choose to enter the foreign exchange trading market. Some are looking to pay debts, whereas others are joining for the excitement factor. Whatever the reason, one must have a working knowledge of the market and trading in order to profit. One must also be aware of the different trading tools available as support to the trading strategy.
The most popular type of technical tool is the forex chart, and if you are uncertain of how to use a chart the chances of detrimental losses are high. Below are the most commonly seen mistakes that forex traders make when using forex charts.
Complicating the forex charts
One mistake many new traders experience is that of too many trading tools. Many believe that the more trading tools used leads to larger amounts of profit. However, this is a fallacy as the more trading tools can lead to more confusion and losses. It is important to determine which are the useful items and which are the irrelevant ones. The beneficial tools will be those that provide information relevant to your trading and currency pairs.
When filtering through the different trading tools available you will need to determine which are most advantageous. It is highly recommended that you retail the forex charts if you are using technical analysis. These charts offer information on the forex market using graphs making analysis much simpler for the new trader.
Analysing the forex charts
Analysing forex charts is an essential aspect of technical analysis. It is imperative you are able to complete this task if you wish to be a competent trader. It is highly recommended that beginner traders begin using one type of chart before moving on to others. By mastering a single chart initially you will develop your skills adequately and learn to trade effectively.
Forex charts are used as trade indicators. When you conduct effective analysis of these charts you will be able to predict future trends on the market. By using these charts you will have an advantage over fellow forex traders making you more likely to succeed in trades.
The forex chart timeframes
It is important to note that not all forex charts operate on the same timeframe. This means you have the option of various timeframes when choosing a forex chart. A common mistake made by new traders is not noting the different timeframes and using the incorrect chart for the incorrect trade. The most suitable chart will depend on your trading strategy and style. The long-term trader would do best with a long-term forex chart, whereas the short-term trader should opt for a chart providing real time data for the past hours. This makes it essential to determine what strategy you will be using before choosing a forex chart.
The forex chart trading sessions
Just as forex charts are set to different timeframes, they are also set according to time zones. It is important you determine which market trading session you will be trading in before choosing a chart; using an inappropriate forex chart can lead to detrimental losses.