Day #1 How to Read Forex Trading Chart Like a Pro

Day 1

How to read forex trading charts?

For trading, the most important skill a trader must equip is knowing how to read chart. If the chart is read correctly, it will help trader to forecast fairly accurately where the market is going with high probability.

Th following are my simplify way where you can quickly learn how to read of read a trading chart. 

Trend Following: Riding the Wave

Imagine a surfer catching a wave. Trend following is similar. You want to identify a strong trend, then hop on when the opportunity aligns with the trend's direction. Here's a breakdown:

Identifying Trends: Look for a series of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend) on your forex chart. There are many tools to help, but for beginners, focusing on price action itself is a good starting point.

 Chart #1 Uptrend chart

Bullish Market (upward trend):

Bullish market is characterised by Higher-High and Higher-Low price movement.

Chart #2 Consolidation or Sideway chart

A sideway market, also known as a range-bound market or a non-trending market, occurs when the price of a currency pair fluctuates within a relatively narrow range for an extended period of time. It has also choppy price action where the price often makes small, erratic movements within the range, making it difficult to predict future movements.

Notes: Most trader avoid trading sideways market because it’s difficult to predict the price movements.

Chart #3 Downtrend chart

Bearish Market (downward trend):

Bearish market is characterised by Lower-High and Lower-Low price movement.

Entry & Exit Points: For a downtrend, you'd look to sell when the price rallies slightly within the downtrend channel, aiming to buy back at a lower price if the downtrend resumes.

Chart #4 Trendline chart

A trendline is a fundamental tool used in technical analysis in trading. It is a straight line that connects two or more price points and extends into the future to act as a line of support or resistance. The main purposes of trendlines are to identify and confirm trends in the price movements of securities.

Upward trendline:

Uptrend: Characterized by higher highs and higher lows. The trendline is drawn below the price connecting the lows.

In a uptrend, trader will look to buy at trendline areas and ride the trend upwards for gains.

Downward trendline:

Downtrend: Characterized by lower highs and lower lows. The trendline is drawn above the price connecting the highs.

In a down trend, trader will look to sell at trendline areas and ride the trend downwards for gains.

Support & Resistance trendlines:

Support Trendline:

This is drawn below the price action and connects a series of lows. It acts as a support level, indicating that the price has had a tendency to stop falling and reverse at these levels.

Resistance Trendline:

This is drawn above the price action and connects a series of highs. It serves as a resistance level, suggesting that the price has tended to stop rising and reverse at these levels.

If the range of the support and resistance lines is wide enough, trader can open buy trade at the support area and take profit near or at the resistance area. Conversely, trader can open sell trade at the resistance area and take profit near or at the support area.

Guys, that’s all for Day #1. I hope you have learned something here.

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