First-Hand Forex Experience: Trading with Charts

First-Hand Forex Experience: Trading with Charts

Last Updated on May 31, 2021

Introduction

In a nutshell, Forex trading is speculating on whether the rates of currencies of various countries would rise or fall against each other, then simultaneously buying one currency while selling another. The difference between the rates would be the profit earned. It is not uncommon to trade commodities as well, such as crude oil, gold, silver, etc., but in this article, we’ll be focusing on currency pairs.

Since international trade and commerce are integral to business, the need for Forex (foreign exchange) trading arises. This is why we have the entire world of Online Forex Trading where we seek ways to profit.

It is essential to always keep in mind, however, that Forex trading entails multiple risks. To become a skilled, seasoned trader, you’ll need to learn the various nuances, boost your money management skills, be patient and disciplined. Armed with all this knowledge, ultimately, you may find that Forex trading is indeed your cup of tea. So let me share my knowledge of trading with charts.

Discovering Forex trading

I was introduced to Forex by chance as I was looking to make some money on the Internet. Unfortunately, prior to that, I had fallen victim to scammers who stole a portion of my funds, so here is a warning for my fellow traders: be alert and don’t forget that the realm of online income is full of fraudsters and their schemes.

First-Hand Forex Experience: Trading with Charts

Forex trading, on the other hand, looked pretty technical to me as I am a Software Engineer by education. With some guidance, I was able to execute my first trade. Gradually, I learned more and more about how the system works and what should be done to make a decent profit from Forex trading.

Trading charts = success?

At first, I tended to base my trading on the data I’d collected from thematic eBooks. Thanks to this, I gained some insights on Forex workings, markets’ structure and principles. Soon, though, it turned out that books only gave me theoretical knowledge — good for basic understanding but not sufficient to profit.

Ultimately I started losing my trades and money. All my actions resulted in losses. There was no hope on the horizon, until one day I paid specific attention to charts.

This was the perspective that changed my Forex trading experience once and for all.

Chart trading basics

First-Hand Forex Experience: Trading with Charts

Before we start, allow me to briefly explain some Forex terms. You will definitely find them useful for a better understanding of this article.

Trading charts

Simple. A chart is a graph that displays price fluctuations over a certain period of time. It is a powerful tool that can greatly help you analyze the events of the market and execute your trading decisions when the moment is just right. Over the years, traders have come up with multiple chart types: candlestick, bar charts, line charts, etc. All of them offer a varying amount of details, but their principal purpose is to show historic, present, and expected performance of a stock.

Line charts

In this article, I’m reviewing and comparing line charts. This is the most basic chart type, perfect for beginners and perhaps the least overwhelming of them all. A trader can easily follow a single continuous line representing an asset’s price history. Line charts typically show the asset’s closing price (the last price traded during the time frame).

Time frames

A chart’s time frame visualizes the duration of a trend in a market, and helps traders identify certain trends and plot their strategy around them. There are plenty of time frame types at your disposal: intraday (1-minute, 5-minute, 4-hr, etc.), daily, weekly, monthly, even annual. For instance, in the case of a 1-hour time frame, the smallest element on the chart is formed within one hour. The general rule here is to juggle both short-term charts and long-term charts for your price analysis. You can use bigger time-frames to see the general picture and get a broad perspective, and then you can zoom in on the last couple of months, days, and hours with the help of smaller time-frames.

Trends

Simply put, a trend is an overall direction in which the market is heading, or that of an asset’s price. Trendlines are your instruments for identifying trends by connecting a series of highs or lows.

Trading with the help of charts

Like I have already mentioned, the below time frames are self-explanatory and indicate the different types of charts for a chosen currency pair, and all trends are clearly visible when looking at them. So let us look closer.

Notation keys:

  1. M1 = 1 minute updated charts
  2. M5 = 5 minute updated charts
  3. M15 = 15 minute updated charts
  4. M30 = 30 minute updated charts
  5. H1 = 1 hour updated charts
  6. H4 = 4 hour updated charts
  7. D1 = 1 day updated charts
  8. W1 = 1 week updated charts
  9. MN = 1 month updated charts

All the above time frames are self-explanatory and will indicate the different types of charts for a chosen currency pair and all trends are clearly visible when looking at them.

Example 1. M1 Chart for EURUSD

M1 Forex Chart for EURUSD | Example 1

Example 2. M5 Chart for EURUSD

M5 Forex Chart for EURUSD | Example 2

Example 3. M15 Chart for EURUSD

M15 Forex Chart for EURUSD | Example 3

Example 4. M30 Chart for EURUSD

M30 Forex Chart for EURUSD | Example 4

Example 5. H1 Chart for EURUSD

H1 Forex Chart for EURUSD | Example 5

Example 6. H4 Chart for EURUSD

H4 Forex Chart for EURUSD | Example 6

Example 7. D1 Chart for EURUSD

D1 Forex Chart for EURUSD | Example 7

Example 8. W1 Chart for EURUSD

W1 Forex Chart for EURUSD | Example 8

Example 9. MN Chart for EURUSD

MN Forex Chart for EURUSD | Example 9

As you compare the different types of charts with the same currency pair and period, you will realize that they offer you a market perspective to see what is going to happen in the future. All you have to do is to be able to study them.

This is what I’ve done. Now almost 90% of the trades are correct as I am trading with the already established market trends. I get correct timings and it is very important for making profits from trades.

Compare the M1 and M15 charts. Looking at the trends on the M1 and M5 charts we can easily see that the trade should be between 15 minutes and 1 hrs.

M15 vs. M30

Looking at the trends on the M5 and M30 charts we can easily see that the trade should be between 1hrs and 3 hrs.

M30 vs. H1

Looking at the trends on the M30 and H1 charts we can easily see that the trade should be between 2hrs and 6 hrs.

H1 vs. H4

Looking at the trends on the H1 and H4 charts we can easily see that the trade should be between 3hrs and 12 hrs.

H4 vs. D1

Looking at the trends on the H4 and D1 Charts we can easily see that the TRADE should be between 6hrs and 24 hrs.

D1 vs. W1

Looking at the trends on the D1 and W1 charts we can easily see that the trade should be between 12hrs and 48 hrs.

W1 vs. MN

Looking at the trends on the W1 and MN charts we can easily see that the trade should be between 1day and 7 days.

I hope that this Forex article will help educate Forex newbies on the present and persistent market trends, as well as eventually make their trading profitable.


The article is written by Neeraj Saxena and is participating in the Forex Article Contest by FXOpen. Good luck!

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