If you take a look at any given Forex or stock market chart, you’ll notice that it’s a series of ups and downs. You’ll also notice that rarely does the currency or equity oscillate monthly forex and down statically. There’s always some larger overall rising or falling trend. Similarly, in the Forex the equivalent rule is that a rising currency value may and probably will have many small ups and downs but generally within a larger, more consistently rising value that continues until some market event or external political or economic event brings the trend to a halt.
Determining how to profit from this observation is the subject of many books, speeches, software implementations, and seminars. Some of these strategies are available for a significant fee, but underlying them all are some well-known market facts available without cost. Others employ trading systems that encourage trading on 5- to 15-minute charts or daily charts. Trading against the trend, needless to say, can be a recipe for disaster. Systems based on weekly charting are a less labor-intensive way of participating in the Forex market. Assuming you have a good basic understanding of the Forex market and various risk reduction strategies, you’ll want to begin to develop your weekly trading system by looking at some charts.
These are mostly generic charts, widely available online from brokerages and trading house without cost. Here, you’ll learn the basic idea underlying each chart or indicator. Moving Average: This is the simplest and most popular of all trend indicators. Moving average charts plot the rise or fall of the currency value within a given time frame.
Stochastic: This differs from a moving averages chart in that it doesn’t look primarily at the quantity of the rise or fall, but rather its velocity. Relative Strength charts assess the rise or fall of a currency in relation to other currencies. One way to begin using these charts is with the simplest, the moving average. If the currency rises above a moving average for a given time period, this is a buy signal, although a rather primitive one. If the currency rises above the moving averages of two charts of the same currency but with different time periods, this is a stronger buy signal.
A comparison with the moving averages of another related currency–the Euro vs. Pound, for example–can provide additional insight into the relative strength of your selected currency, the US dollar. The main thing to remember is to trade small and be patient. As with trading generally, use stops, set targets and stick to your trading plan. Is There a Way to Completely Eliminate Losing Trades? The Balance is part of the Dotdash publishing family. May the Fourth be with you!