Any average forex trader will tell you that the reason they use charts when forex trading is because these charts somehow help them predict future price movements.
However, when you examine the trading records of these traders, you will observe that most of them lose some money. With this,you may be asking what are they doing wrong?
Well, there is a correct way and a wrong way to make use of these charts.
Technical indicators can definitely be helpful, especially when various indicators are in alignment with each other and show that the prices are likely to move in a particular direction in the near future.
The problem is that many forex traders go wrong because they enter trading positions at specific price points that do not actually have real significance.
For instance, you may see several indications on the charts that seem like a promising reversal signal. However, if it is not near a key support or resistance level, then the chances of success are significantly lessened.
The most ideal way to make use of charts when trading on the foreign exchange market is to enter positions in agreement with the key players on the market, such as financial institutions and banks, because they are the ones that actually move the markets.
Therefore, you have to enter positions at key support and resistance levels. To help you do this, the following are essential tools that you should use:
- Pivot points
- Round numbers
- Fibonacci levels
- Most commonly used technical indicators, such as the 200-day moving average.
When you have all these areas of support and resistance on your charts, you will begin to see that the price will frequently react in a predictable manner around these levels.
Moreover, when you have these various indicators marking out key support and resistance levels, the probability of your success is intensified even further since there is a higher chance that the prices will reverse when it reaches one of these levels.
The key to a successful trading in the forex is to put the chances firmly in your favor each time you enter a trade.
So by marking some key support and resistance levels on your charts through the various tools that can possibly be used, you will increase your probability of success because you will be trading with the key market players rather than against them.
If you are going to ask the best forex broker or look into the most successful forex traders on the different forex forums, you will see thatmajority of them tend to use key support and resistance levels as reliable cues to enter a trading position.
With this, if you are still having difficulty making money from the foreign exchange market, this might be something that you will want to consider trying out in the future. It is generally considered as the most profitable way to trade in the forex and also one of the best ways to make use of price charts in trading.