Page 45 - Ultimate Guide to Currency Trading

charts, averages, and indicators to help you the trader determine the best time to enter and exit out
of a currency trade. A FX trader who uses technical analysis will use these charts and indicators to help
her analyze the markets and look for setups. Most charts and indicators can be accessed from your
trading platform, and you can even adjust the inputs to add the indicators for the whole market or just
one currency pair.

Technical analysis is a graphic representation of the price and number of trades (commonly
called volume) of a currency pair over time. The most common chart is called a bar chart. A bar chart
shows the high and low points of a FX pair at time intervals that are preset by you on your trading
software. For example, you might be looking at a one-hour chart to get an overview of EUR/NOK while
reading the news, websites, brokers' reports, and other sources of fundamental analysis. By setting
your chart parameters to show EUR/NOK's movements in one-hour intervals, you would be able to see
a chart that traced the history of the cross pair back about five weeks.

It is good to use a few of the key technical indicators while evaluating setups in
your currency trading program. There are over 200 different ways to use technical
indicators in your analysis from an advance/ decline line to a zero-lag, exponential
moving average and everything in between, all providing different levels of quality

information.

Once your observations about the possibility of going short EUR/NOK being a good trade were
confirmed, you could then switch to a five-minute or even a fifteen-minute chart to help you further
determine a proper entry point to short the EUR and buy NOK. The modern software on most FX
brokers' trading platforms can allow for multiple time frames to be viewed, and some even allow for
multiple time frames to be viewed at the same time.

Some Currency Trading Technical Indicators

Other information that you could use in your technical analysis could be to draw moving averages
onto your chart. It is easy to go to a drop down box and go to "Moving Averages" and enter a number
of days to be used in the computer's calculation. A useful and popular line to draw is a 200-day moving
average. When you ask your software to calculate this line, a contrasting colored graceful line will
trace its way across the otherwise choppy bar chart. A chart drawn on Windsor Brokers
(www.windsorbrokers.biz) Windsor Direct 4 platform can show a Spot Gold/USD one-hour chart. The
irregular line is actually separate lines showing the open, close, and movement for spot gold once per
hour. The wave is a 200-day moving average fine, and the spikes at the bottom of the chart are
volume indicators.

There are others, including support and resistance lines, and 50-day moving averages. Some
indicators are currency pair specific. Examples of these are the Fibonacci series and Elliott waves, or