If you are using technical analysis and forex Charts, then using the simple combination below, will help you catch the really big trends that yield the big profits and make your profits soar.

Let’s look at this combination on Forex charts and how to turn it into profit.

We are going to look at a 3 step process that anyone can incorporate in their forex strategy that can make it more successful.

1. The weekly trend

Very few forex traders look at the weekly charts, but the weekly chart shows you the longer term trends and effectively separates out the “wood from the trees”, so you can see the important trends.

When looking at the weekly chart you simply need to look for valid support and resistance.

By valid – we mean areas of support that are considered important by the market and have been tested several times in different time frames.

2. The daily chart

Look for the points above, to be in synch with the daily chart, so the same important price levels are lining up on both charts.

Note:

If you have support and resistance that is valid then chances are there are stops behind these levels and trend following systems waiting to kick in if these levels are broken, so the break will continue and a new trend develop.

When these breaks occur they tend to move quickly and they don’t retrace much, so you need to be prepared to buy the break and miss the first part of the move.

Don’t try and anticipate and get in anyway – this won’t work!

A breakout is only valid after it occurs and if a level has been tested then of course it can hold as well, so you need to trade on confirmation only.

3. Getting confirmation

The way to see if a break is going to continue or reverse is to look at price momentum.

There are lots of momentum indicators to look at but two that work well in combination are the Relative Strength Index RSI and the stochastic.

Watch for a rising RSI and for the stochastic lines to pointing in the direction of the break if they have crossed with bullish or bearish divergence just before, all the better.

If you don’t know how to use these indicators – they are an essential part of your forex education!

There easy to learn and apply, so check our other articles.

The biggest profits from the really big moves

If you follow the above tips you will tap into the really big profits from the big moves – they don’t occur often just a few times a year, but these are the trends that yield the biggest profits and the lowest risk.

Most traders don’t do this and most traders don’t win!

Most traders hate buying breakouts, as they think they have missed the first part of the move and want to wait for the pullback to get a better price – but on valid breaks prices move quickly and you need to be in

as prices wont come back quickly and you will never get a better price.

If you can buy or sell breakouts, keep in mind they normally pile up bigprofits so the fact you have missed a little bit of the intial move is fine there is plenty more to come and of course it is missing this bit that gives you the odds in your favor.

Watch your profits soar

The majority of currency traders can’t psychologically buy or sell breakouts, but the majority don’t win – so dont let that worry you – join the winning elite who can and do make huge profits.

If you incorporate the above in your forex trading, it can lead you to currency trading success and really help your profits soar.

Here we are going to look at how to use forex charts with a live example in the markets and how you can use them to find high odds probability trades and the opoportunity we are going to look at is in dollar yen.

The dollar has had a great rally against the yen but the longer term trend I down are we near a top in the dollar. Let’s take a look at what the forex charts are saying – its Am 17 of January…

Forex charts can help you spot the low risk high reward trades and the set up below is such an opportunity. You will need a chart service and a great one is futuresource.com pull up the daily weekly charts and add the indicators below and you’re all set.

The main premise of the set up below is that the dollar has rallied in a down trend to firm resistance which presents an opportunity for dollar bears to accumulate yen

The Logic

If you look at the weekly chart you can clearly see resistance to the dollar at 114. We also have a yen trade that is up with lower highs from the July in a strong trend the mid Bollinger band will act as resistance or support, in this case it acts as resistance and is just above the 114.00 level. Momentum is up at present – will the resistance hold its time to look at the daily chart.

The daily chart again shows the dollar targeting the 114.00 level.

Prices have advanced through the middle Bollinger band on higher volatility and are at the outer band which is just below the 114.00 level. On both charts 114.00 is resistance and on the daily chart prices are now over extended on the upside.

Triggers

The first warning of a top is the RSI starting to roll over and double top with the October high at 60.00 level. Stochastic momentum is also turning over and we are looking for bearish divergence to be confirmed – the stochastic is turning down from overbought levels.

Even if the long term downtrend does not continue and the dollar breaks up longer term, we would still expect at least a good dip from around current levels to correct the dollars overbought status.

The advantage of forex charts is being able to step back and see the wood from the trees – if you act on what you see i.e the reality of price you can execute trading signals when the risk reward is in your favour.

On any Forex chart, you’ll see repetitive patterns that you could have traded for profit. This article is about spotting these repetitive patterns – and using technical analysis to create big consistent gains from them.

Use Forex charts and follow these 3 simple tips for success:

Step 1. Understand Support and Resistance

If you want to make money in Forex trading, you need to understand support and resistance – and incorporate it into of your Forex trading strategy.

An important point to keep in mind is to only trade valid support and resistance – as market participants consider these important.

Firstly, forget about using support and resistance in short time frames – it doesn’t work. All volatility is random in short time frames – so if you’ve been thinking about day trading – forget it.

You need to look at your Forex chart, and see support and resistance that’s held for weeks or months – and already been tested several times. As a general rule look for five tests or more.

You then need to decide whether support or resistance will hold, or break – and this is the difficult bit for any currency trader.

Step 2. Trade with Momentum

Most currency traders simply see prices approach support and resistance – and buy or sell – hoping the levels hold. Try this, and you’re sure to lose money. You’re guessing, and hoping – and the Forex markets will wipe out the equity of any trader that does this!

To be successful with your currency trading system, you need to calculate the odds of levels holding or breaking. This means looking closely at the momentum, and strength of price.

For example, if price momentum weakens into resistance, then you can sell. If however, price momentum accelerates into resistance, then you should hold back – and wait for the break to execute your trading signal. This way you’re always trading with price momentum – and there are several indicators you can use.

Two of the best indicators are the stochastic and Relative Strength Index (RSI) – which we’ve already covered in previous articles.

If you use stochastic and Relative Strength Index in association with your Forex charts, you’ll gain a huge advantage – by getting the odds in your favour.

Step 3. Cutting Losses and Running Profits

Cutting loses is actually the easy bit – you place your stop when executing your trading signal behind the breakout point – nice and simple.

The hard bit is running profits – most traders simply cannot accept big profits. This may sound odd, as all traders want to run profits. However, few traders can manage to run profits – due to human nature. Why? Because Forex traders are so obsessed with not losing money, they can’t make big gains.

A trader will see a profit on his Forex charts and get excited and nervous at the same time – excited they’ve made a profit – and nervous they might lose it!

The Bigger the profit becomes the more tempted they are to take it – so they move their stop up to close – and gets taken out by normal market volatility. The trader may also snatch the profit, when the temptation becomes too much. Do either of these and of you’ll never make big gains.

You need the courage to hold your stop back – and accept dips in your open equity, as part of Forex trading. Sure, it’s not nice losing a thousand or more per day in open profit – but you need to keep your eyes on the bigger prize!

Look at any Forex chart, and you’ll see trends that can, and do, make Forex traders $10,000 to $50,000 – maybe even more. You just need the courage to hold on.

If you check your Forex charts for valid support and resistance, and trade with momentum on your side, and have the courage to run your profits – then you’ll make huge currency trading profits.

Forex charts and technical analysis is a great foundation for a successful forex trading strategy but most novice traders keep making the same mistakes and lose.

If you don’t want to join them, avoid these common forex chart mistakes!

1. Using Useless Indicators

These are indicators based upon flawed logic and are mostly loved by the far out investment community and in the hall of fame we are going to place:

Fibonacci numbers, Elliot wave theory and cycles.

They all come from the markets move to scientific theory brigade.

Really?

Well if markets were scientific there would be no market as we would all know the price in advance. Of course uncertainty is what causes prices to move.

Ignore the above Fibonacci numbers were devised to solve a problem to do with the copulation of rabbits and are nothing to do with forex.

Elliot never made any money trading (despite what his fans say) and cycles well – look at a chart and see if you can spot repetitive ones I cant

2. Using Indicators with NO valid data

Day trading! If you want to use forex charts to make money you need reliable data and in a day or a few hours it’s not – volatility can and does take prices anywhere, so its impossible to win no matter how good your indicators are.

3. Using lagging indictors to lead

Main error here is buying dips to moving averages. Lesson never use a lagging indicator to enter trades you are relying on hope you need to use momentum indicators!

4. Not Using Momentum Indicators

If you don’t know what a momentum indicator is you will never enter with the odds on your side.

If you are using forex charts you need to enter with price momentum on your side and this is why they’re so important.

Two great ones for timing entry on your forex charts are stocastics and Relative strength index – learn about them and use them.

5. Using Too Many Indicators or Rules

In forex trading this causes disaster for any forex trading system.

Less is more when trading, as your forex system will be more robust in the face of brutal market conditions.

Use too many indicators and there are to many elements to break and believe me they will – simple systems work best and always have.

6. The Dangers Of Curve Fitting

Why is it so many back tested systems fail in real time currency trading?

The answer is curve fitting – where the system is bent to fit the data.

One trader I know likened this to shooting at a barn door and then drawing a bulls-eye around everyone one AFTERWARDS!

Many traders cannot get their currency trading system to work so bend the rules a bit to make it- this is curve fitting and its more common than many people think.

Of course no two periods of trading history are exactly the same and that’s why the system fails in real time going forward.

Avoid These Errors At ALL Costs!

These are six common mistakes and there are many more but if you want to win at forex trading then avoid them any one of them can cause you to lose your equity quickly.

Many forex traders think technical analysis is akin to some kind of science where prices move to some mysterious theory but they don’t, they are a direct result of human nature. If you understand the formula enclosed and its significance, you could soon be making some big forex profits.

Prices move to this equation:

Fundamentals (supply and demand facts) + Trader perception of = Price

The news and supply and demand factors are important but it is human perception of them that makes the price. We all have the same facts to look at – but you, me and millions of other traders all have our own views and this mass view, equals the price.

Human nature is constant – we are not creatures of logic though, we are creatures governed by emotions. The emotions that dominate in forex trading and can be seen on a chart are: Hope, greed and fear.

Forex charts are not a science as many technical traders would have you believe, humans don’t conform to a scientific theory – but we do as a mass create high odds chart formations, as a direct consequence of our emotions. Our trading psychology repeats and will continue to repeat, as human nature NEVER changes.

Trends tend to reflect the long term supply and demand for the currency and can last for weeks, months or years and are easy to spot on a forex chart. Of course, any currency reflects the underlying health of the economy and economic trends last a long time.

As humans though, we have a tendency to push prices too far (both up and down) and these price spikes are pure emotion. Prices always return to fair value from these spikes and the fact there temporary means – They can be spttted and traded for profit.

Fact:

Markets collapse when they are most bullish and rally when they are most bearish – this is human nature at work.

Price spikes can be traded for profit and they don’t just occur in long term time frames, they also occur in shorter periods within the main trend and traders will try and swing trade these overbought/ oversold scenarios.

Forex charts are a great way to trade because, you see the reality as it is – the fundamentals are taken into account and more importantly, all trader’s perception of them.

A technical analyst doesn’t care how or why prices move, he just wants to make profits when they do!

Charting as we have said is an odds game not a game of certainties – its an art and you have to learn the right formations and how to time your trading signals; this comes with practice and anyone can learn to use them. Furthermore, when using charts you only need a simple system based upon support and resistance and a few timing indicators and that’s it. In forex trading, simple trading systems work best, as they are robust and have fewer elements to break than complicated ones.

So if you want a great way to trade forex markets get your charts out and start practicing your art, it could make you big profits and bring you currency trading success!

If you want to win at forex trading then using forex charts and technical analysis is a great way to do it. Forex charting is easy, time efficient and works yet; traders still make basic errors that cause them to lose.

Let’s look at the errors made and why you need to avoid them.

1. Forex Charts Predict

A common mistake, traders think they need to predict to win – but of course this is simply hoping or guessing and is destined to see you lose.

If you use charts the correct way, you trade on the reality of price change and trade it, you don’t predict.

There is a big industry in forex trading that says prices move to a scientific theory and you know what will happen next – but of course if prices did move to science, we would all know the price in advance and there would be no market.

Don’t believe any of the prediction nonsense – trade the reality of price change i.e if a price comes to support, don’t predict support will hold, wait for it to move the other way and trade the fact it has held.

Another great way to trade is to trade now breakouts to new highs or lows – it’s a proven fact that most big moves start from these breaks, so make breakouts part of your forex trading strategy.

2. The More Inputs the Better

5 or 6 indicators must be better than 1 or 2 – totally wrong!

The more inputs the more chances are the system will break.

Simple forex trading systems work best and always have.

All you need is support and resistance and a few indicators and your all set.

3. Using Invalid Data

You need to use technical analysis on valid data, where you can get the odds in your favour.

Do not try and use forex day trading or scalping systems the data is to short to be traded. All volatility is random and you can’t use it, so don’t – Either forex swing trade or trend follow.

4. Using Indicators in the Wrong Way

Many traders do this.

They use lagging indicators such as moving averages to enter price, or Bollinger bands are stops. This is not what they were intended to do!

Use an indicator for what it was intended and understand its limitations.

5. Curve Fitting

To succeed with forex charts we have said you need to keep your system simple and if you do, you will avoid another common mistake curve fitting.

Today with powerful software packages, it’s tempting to back test and bend the rules to fit the data to make a profit – this is also known as curve fitting.

If you do this, the system will collapse in real time trading, as no two segments of data repeat themselves in the same way again.

To avoid curve fitting – keep it simple and make sure the rules you use to execute your trading signal are the same for all currencies and all market conditions.

A Simple Route to Profits

Forex charting is essentially simple – You need to use support and resistance and a few confirming indicators and to trade the reality of price change either, with breakouts or shifts in price momentum near support and resistance tests.

If you do the above, you can build your own forex trading system in about a week and you could soon be making profits, big ones, in less than 30 minutes a day.

Here we will look at forex charts and basics for beginners and novice traders on what they have to do enjoy currency trading success. Charting is not a science, it’s an art but if you learn the basics below, you will soon be using forex technical analysis confidently and enjoy forex success.

Here are your forex chart basics for success.

1. Pick a time frame

Forget day trading it simply doesn’t work as the time period is to short. You can either follow long term trends and forex swing trade. The former has the biggest profit potential but requires plenty of patience and discipline and the latter sees trades come more often and requires less discipline.

2. Simple = Best

Keep your forex charting system simple – simple systems work better than complicated ones.

Why?

Because they are more robust and don’t have as many elements to break.

3. Don’t Predict

Many traders think they need to predict with their forex charts but prediction is doomed to failure – Why?

Because – you are hoping and guessing and this is not a good way to make money in any market – especially forex trading.

You need to confirm all your moves with price action. We will come onto this in a moment but let’s first look at the basis of all good forex chartists systems.

4. Support and Resistance

If you don’t know what it is look it up, it’s an essential part of anyone’s forex education.

All good forex trading systems understand it and use it.

You need to trade valid support and resistance. This means as many tests as possible ( but no less than 2) in as many different time frames and the wider apart the better. If it’s valid, you can trade into to it and look for it to hold or break and catch new trends.

5. Confirm Don’t Predict

For example – if you want to buy into support don’t just jump in hope support holds wait for a turn in price momentum and use leading indicators such as ADX, RSI and the stochastic ( there discussed in our other articles ) and trade the reality of price change.

Don’t however think of just trading levels holding look to trade:

6. Buy Or Sell Breakouts

It’s a fact that most big trends start from new market highs NOT market lows.

While you don’t buy low and sell high you do something that’s very profitable you – buy high and sell higher. All the best forex chartists do this and you must to.

7. Be Objective Not Subjective

Ignore indicators that mean you have to make to many subjective judgements, go for indicators combined that give you a clear trading signal – NOT indicators like cycles Elliot Wave etc where your emotions could get involved.

The above are the bare basics you need to know when using forex charts and they should form the basis of your forex trading system.

Keep in mind keep it simple – simple systems work best are easy to understand and easy to apply and if you use objective indicators, you will keep your emotions out which are the enemy for most traders.

Forex charts can make you a lot of money, so learn how to use them the right way and currency trading success could be yours.

Forex charts are a great, time efficient and proven way to make bigger profits but most traders don’t use them correctly and here we will give you some key points to help you make bigger profits…

Let’s look at some key points for more profitable technical analysis with forex charts.

If you look at any forex chart you will see big trends that can last for many months and trend following these can be very profitable and if you want to make money out of them you must understand this key fact:

Most big trends start and continue from breakouts to new highs and lows on the chart and you must go with these breaks – most traders don’t. They want to wait for the pullback and of course it never comes and they are left behind. While it appears like you have missed the first part of the move, the odds of continuation are high so go with them.

Always be patient when using forex charts. You don’t get rewarded for your efforts or how many times you trade but being right with your trading signal. I know traders who trade just a few times a month yet make triple digit gains – so wait for the right opportunities.

When you have a trend you want to hit always check price momentum is on your side and make sure that you use momentum indicators that show price acceleration in the direction you wish to trade. Two great ones, you can learn, in about 30 minutes are – the stochastic and RSI. These two combined will increase your odds of success by getting the odds more on your side.

Never believe anyone who tells you there is a mathematical formula for market movement – there isn’t. If of course there was, we would all know the price in advance and there would be no market. So forget trying to predict and only trade the reality of price.

Its probabilities that you need to understand and like a successful poker player, you won’t win every hand – but if you keep trading the odds, you will win long term. When using forex charts, the simpler your forex trading method the better, as simple systems tend to be very robust and have fewer elements to break, than complicated ones.

I have used a simple breakout method which uses trend lines, RSI and the stochastic and made money with it for over 20 years sure, it’s simple but it works. Forex charts give you the reality of price before your eyes and you can spot areas of over valuation and under valuation. Humans create trends and they also (due to their emotions) push trends to far up or down in either direction.

You can of course ride trends – but you will also see big price spikes and history tells you they don’t last long and taking trades contrary to the majority can be very profitable. Charting is an art not a science and you need to practice your art. The successful captain of a ship uses charts to navigate safely, but he also knows that use them wrongly and he will drown and it’s a very similar situation in forex.

The Good News

You can learn forex charting in around 2 weeks and soon be piling up big profits in around 30 minutes a day spotting and hitting high odds trades and enjoying great profits. The good news is forex trading and using technical analysis is a learned skill and one you can master with a little practice.

When it comes to investing on the Forex, there are two basic paths you can choose: Fundamental or Technical. Fundamental investors look at changing interest rates, GDP figures, and other economic indicators to help them anticipate fluctuations in the exchange rates of currency pairs. Technical traders, on the other hand, look for trends in the market to help them identify currency pairs and the best enter and exit points on a position.

Fundamental investors rely upon news releases and their overall impression of the economic outlook of nations in a currency pair. Technical traders, however, use charts and the application of analysis to help guide their investment decisions. Fundamental investors tend to be short-term investors while technical traders try to look at the bigger picture and be more focused upon the long-term pricing outlook.

In truth, most technical retail traders on the Forex market do not have the time to compile charts from scratch. While many retail investors do import information into programs like Excel in order to interpret the information, they still tend to rely on an outside source for the raw data. To do this, the technical retail trader relies upon Forex chart providers like the following:

• FxTrek
• ESignal
• FX-Charts

So who is the top Forex chart provider? The answer to this question depends upon the individual investor but you do want to look for a provider that produces charts that are easy-to-read and relevant to the particular strategy you employ. Now there are chart providers that are going to insist upon offering up a ton of “insider secrets” to the market in addition to their charts. In fact, all providers will provide some degree of insight but this is no criteria to choose a chart by-this information will only confuse you and cause you to doubt your investment strategy.

If there is one common problem to most investors new to the Forex it is a tendency to over trade and ignore the stops they put into place when acquiring a position. Fear is a common human emotion and it guides more investments than people think but it also causes people to exit positions prematurely and over trade. While the opinions of investment experts may sound perfectly logical and a lot more involved than your own strategy-they are just opinions. The market is always right-no investing expert can claim likewise.

Once you acquire a position, place your stops and keep them in place. Losses will happen but you need to perfect your own investing strategy using continual back testing and chart analysis-not listening to the opinion of others once you are already in the game. What you need most of all from an FX chart provider is accurate and easy-to-read charts. While the advice may be helpful when learning the market and prior to acquiring a position, it tends to breed fear and cause doubt once you already are in the game. Thus, choose your chart provider based upon their charts-not the advice they produce each and every month!

Here we are going to give you an introduction to the basics of forex charting and how to use them to successfully catch and hold forex trends for big profits.

Forex markets (or any financial market for that matter) move to this basic equation:

Fundamentals + Investors Perception of them = Market price

The fundamentals are the supply and demand facts and we all see them but being humans we all draw our own subjective judgements on what they mean and we are not just influenced by logic – but the emotions of greed and fear as well.

It’s very difficult to trade the fundamentals, because all the facts are instantly known and discounted in the price and of course you never quite know how humans are going to view them.

A basic premise of using forex charts is to simply assume that all fundamentals are instantly discounted in the price and no study of them is needed – while this sounds essentially simple (and it is), it means a chartist is not interested in knowing them – he is only interested in price movement generated by them and investor psychology.

How and where prices move is decided not by the facts or supply and demand situation but is down to how investors as a whole see them, this then becomes the market price.

A basic foundation of forex technical analysis is that history repeats.

Why?

Because human nature is constant it will be reflected in forex charts as repetitive price patterns that can be traded for profit.

In essence forex charts allow us to study the fundamentals and investor psychology all at once – a technical analyst is not interested in how or why prices move – he just studies the charts and wants to make money when they do.

Another foundation of technical analysis is that a trend in motion is likely to persist and the aim is to lock into these trends and hold them for profit.

The fact is anyone with the right forex education can make money using forex charts but it’s an art not a science and you need to learn a method based upon sound logic.

Many forex traders base their currency trading systems on trying to predict forex prices but this is wrong.

Why?

Because it’s simply another word for hoping and guessing and that won’t get you far in any walk of life and that includes forex trading.

Forex charting is a game of odds – not certainties and you need to keep this in mind while chart patterns do repeat they do not move to a scientific theory.

If you want to learn currency trading and be successful then charting is a quick simple and profitable method and takes very little time. You can learn it in a few weeks and you can then cover your currencies daily in around 30 minutes and that’s it.

Forex charting basics are enclosed but you will now say – I like the idea how do I use them for profit? That is the subject of part 2 of this article series.