Using Candle Charts in Forex Trend Analysis
Forex traders often stick to a particular set of tools when it comes to making technical analysis. If you are not yet using candle charts, you may want to consider including it in your toolbox.
Candle charts (or candlestick charts) are not as popular as other technical tools, and this is rather unfortunate, as it can be a highly beneficial tool. The major hindrance to the wide acceptance of candle charts, especially among new traders, is its perceived difficulty. It is not.
There are basically two types of candle charts, the black and white body. Both include the major indicators of an item or currency price:, the opening, high, low and closing levels. By analyzing these four major points and their movements in relation to other candle charts, a forex trader can gain insight into possible market trends.
As the forex currency price moves towards a significant Pivot Point (high or low, depending on your choice), end the session with a purchase of the desired item or currency. Alternatively you can compare previous candle patterns to determine if the closing is a new high, or if it is indicative of a bullish trend, then buy at the succeeding session.
Next, check the Pivot Point for the lowest point and establish your Stop/Loss order a few points below this level. As for the ideal exit point, you have two choices: at the close of the forex session, or when the candle chart reaches a new low.
Another area where these to technical indicators can work together is time frame analysis. Create candle charts and Pivot Points for dally, weekly and monthly forex price readings. By comparing the opening, highs, lows and closing levels, you will be able to forecast the upcoming forex trends.
While candle stick charts work well Pivot Points, it can also co exist with other technical indicators. If you are still uncertain about candle charts, you can utilize other forex technical tools to confirm the market signals being indicated.
Candle stick charts are widely used in Japan, and there is no reason why it should not be used as extensively in the United States and Europe. While it requires time to learn, it is well worth the patience and effort, because it will give the forex trader a great advantage.
In the forex market, trading always occurs in currency pairs. Forex trading, also known as FX trading, involves the buying and selling of currencies of various nations. Forex software also enables traders to monitor forex market trends and to conduct online trading.
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