Reading Charts and Acting Effectively in Forex

Let's take a look at FOREX charts.

It is a good beginning point if the chart is at 300, this is the default number. An hourly chart has 12 days of data, 15 minutes charts have 3 days of data and the 5 minute chart has about 24 hours of data.

What to look for in a chart:

1. Look at the hourly chart to see a bigger and clearer picture. Take note of the important support and the resistance levels of 2% within the opening rate per day.

2. Learn the 15 minute chart in much detail considering the following: > Current trends > Prevailing price in relation to 60 period moving averages > The high and low since the time GMT 00:00 > The tops and bottoms within a 3 day time period

After you gathered the necessary information here's what you will do:

1. Identify the bigger and clearer picture within trading for intraday.

Looking at the chart hourly will give traders the bigger picture, it may be up or down. If you are within a trading range then it is not clear instantly.

Let us take for example that the trend is down.

2. Identify the 15 minutes chart that confirms the downtrend shown by the bigger picture.

Take note that the prevailing price on a 15 minute chart should be 60 period moving average and below, and the average line should be declining. If this is the case then you have set the direction trend to be down.

There are two kinds of trends, the major trend, which is the prevailing and the minor trend. A minor trend is the reverse of the major trend, this only lasts for a short period of time. You can more easily spot minor trends clearly from 5 minute charts.

3. Identify the prevailing trend, either major or minor from the 5 minute charts.

Prevailing price within a 5 minute chart is around 60 period moving averages and below as well as the average line it is declining, this is the major trend.

Prevailing price within 5 minute chart is at 60 period moving averages and above as well as the average line that is heading upward, this is the minor trend.

When you are reading the chart there are other ideas that you must consider:

> You can buy above and sell below, which is said to be an excellent entry level.

> If the market has strong upward movements then you should make both higher bottoms and higher tops.

> When there are strong moves happening then the reactions are smaller, only minor reversals.