Those who succeed at Forex trading will tell you it never comes to them; they get there by being smart and fastidiously learning the tools and trends of the international foreign currency markets. Forget about the talk of luck or just having a good day. Being a successful Forex trader means that you understand what happens, when it happens and what to do about it when it happens. To some extent you need experience but what carries the day is your understanding and keen observation of the market trends. There are 3 integral pillars that any ambitious Forex trader should be aware of. You must be privy to the trading trends, sessions, time frames.
Understanding Trading Charts
Look at any Forex account, you will see the 'candle sticks.' These are the trading charts that you should consider as you do the day’s business. The candle prediction technique has been used for centuries in determining price movement. There are other trading charts like RSI and MACD, but the candle sticks are the best both for beginners and seasoned traders. Even Wall Street uses this highly visual technique since it is simple and effective in keeping track of currency trends. You can be able to establish the trading trend of your currency of choice to as far back as a month. This gives you an edge in establishing the most probable future trend and whether your next investment will rake in profit. The technique uses codes such as M10, M15, M30 H1, H2, D1 all of which denote the time frame in which a pair of currencies have performed for a given period of time. These 2 examples will clarify what candle sticks trading charts mean. USD/EUR H1 means observing the performance of the dollar against the Euro in 1-hour durations. EUR/Yuan M10 means observing the performance of the Euro against the Yuan for a time interval of 10 minutes.
Trends and Time Frames
Learning how things are done in the Forex business needs patient observation. It means sitting around and seeing how one currency fairs against the rest in a given period of time. If you are interested in the Euro, you need to keep watch on its performance against other major currencies. If the performance keeps getting strong then this is an upward trend. If you had a time frame code combination like EUR/Yuan M10 then it means that the Euro gets strong at the intervals of 10 minutes. In every 10 minutes, the Euro performs better than in the previous 10-minute interval.
There are time sessions when things get faster and volatile at the Forex trading platform. This is the time to land great opportunities to make money before things slow down. Knowing the best times to make deals will keep you on the winning side. Different Forex markets have different time windows in which good deals are happening. In New York for example, 8:00 a.m. EST is the time when traders make lifetime deals in just a few minutes. In London, 3:00 a.m. EST is the time when trading gains momentum and this is the best time to throw in your dice. In Tokyo the trading peak time is 7:00 p.m. EST and those who understand the trend usually front their money with the intention of making profits. It takes time to learn on the best trading times but with reliable background information, you can always tentatively make your move.
Here are 2 questions that will guide your trading decisions:
What is the perfect number of time frames to trade?
Here the choice depends on how many fronts over which you want to distribute your trading activities. You can go for a single or multiple trading time frames. Single time frame trading means focusing on a pair of currencies to establish their performance and future trends. For instance, you could focus your attention on EUR/Yuan M10. This means you will be observing the exchange rates between the 2 currencies at intervals of 10 minutes. On the other hand, multiple time frame trading means keeping any eye on more than two currencies for varying time intervals. For instance this is a code combination for a multiple time frame trading: Yi, Hi, H2, M15, M30. The use of longer observing time interval establishes the general market trend while shorter time intervals establish the specific time frames to make a move or stand your ground.
What is the best time chart for you?
The question of the best time chart to use in Forex trading is not that simple to answer. First, each trader has a different goal from the next. Second, it comes down to your account balance. However, there is some general direction which has been established by those who have been in the Forex trading business for years. If you are tentatively planning on a small investment so as to learn how things happen around here before you make a bolder move, then short-time intervals are the best. For your $500, it is recommended that you go with shorter time charts not longer than M15. The advantage with shorter trading intervals is that you do not have to stay financially overnight. You close deals in a matter of minutes and step aside until another opportune moment comes your way. If you have the financial muscle, the longer trading intervals are ideal for you. At this level you should be experienced in scalping and your finances should be able to take any shocks that come your way. You are never in any rush to close a deal- but when you do you make it worth the wait.
You now understand that it is never about luck when it comes to Forex. Your acumen and intuition regarding great deals evolves by understanding time frames, sessions and charts. These, coupled up with experience and reliable software, are the ingredients you need for steady return in Forex trading.