Currency Day Trading – How To Profit From Forex Charts

How can you profit from Currency Day Trading by ‘reading’ a bunch of charts then?

To some Currency Day Trading can sound technical but honestly, the simpler you make your trading, the easier it will be AND the more profitable you will be!

The skill of successful currency day trading  is really in interpreting the charts – basically by trading what you see. These charts include bars, lines, point and figure, and Japanese candle sticks – the most favoured method.

Candlestick charts are visual representation of price movement and market sentiment…oh and they totally ROCK! They were first used in Osaka, Japan from 1700s when predicting the price for rice. The actual names of the candlesticks are taken from an era with strong army, battle and strategic influences.

Not too dissimilar to the thinking used for successful Forex trading today!

This chart type will be used in currency day trading as well as currency intra-day trading, scalping methods and other forms of trading.

We can clearly see price movement taking the various forms of candlestick  patterns evolving in front of us due to live data feed. With currency day trading, the goal is to use these charts together with other indicators to trade with minimum risk for consistent and profitable gains – easy to say but a little harder to do!

Consider adding the following to your currency charts when day trading. Its a fantastic strategy which really works too!

Channel or Trend Lines

Here’s something to make it a little easier. Price movement works in only three directions. Price will move up, down or sideways. When currency day trading you have to decide which of the three ways your chosen currency is moving.

You do this by drawing lines on your chart from the high points of each candlestick which has formed over your chosen time period. This will be either the close or the very tip of the shadow formation of the candlestick. Three or more touches in a straight line which can be horizontal (in a channel) or on an angle (a trend line) will indicate one of the three price movement directions.

Support and Resistance

Any currency day trading technical analyst must understand and implement this. Support and resistance are the levels of safety from previous levels (the security net areas spoken about earlier). Both can be defined as the areas where price will move to and then stall.

In a rising market price will rise to resistance levels, stall and a possible retracement will occur. In a falling market, prices gravitate to support levels where the possibility of a trend reversal is greater.

The most powerful trades are those where price has stalled at a support or resistance level and then ‘break out’ giving the trader a move of considerable pip value. With currency day trading, some chart set-ups used on their own can give false indications, which is why a trader should use other charting tools to identify this move better.

So what other tools do you need?

Well it’s helpful to have confirmation from other types of indicators but taking note the best strategies are the least complex.

Bollinger Bands and Relative Strength Index (RSI)

Both of these will be helpful to you and your trading strategy. Bollinger Bands are good for determining price volatility or relatively how much change has occurred in price movement. An indicator like the Relative Strength Indicator gives you exactly that – the relative strength of price movement.

When currency day trading, it’s good to note the set up you will want is to make sure these indicators show the values of the extreme levels of the scale. For a stronger indication the RSI should be either at the very top of the scale, or the bottom. If the RSI line is hovering somewhere in the middle, the strength of the indicator and therefore price movement is not great.

This method picks out the most telling indicators and chart movements. Keep your currency day trading as simple as you can – not forgetting the importance of a stop loss and money/trade management strategy. Plan your trades and then execute and trade your plan.

To discover more about Forex Training click on the link.

To Your Success!

Annabel

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