Page 66 - Ultimate Guide to Currency Trading

Charts, Graphs, and a Bit of Magic

After you study the fundamental information and begin to look at three or four ideas for trades, you
should shift your perspective to the technical analysis of those currency pairs. Technical analysis is the
reading of charts and market-trading indicators and assessing the optimal time for getting into a
currency pair. It is often used for looking at short-time trading patterns, and if used properly, will
enable you to get a feel for the best time to enter and exit the trades that were previously confirmed
by your fundamental analysis.

Technical analysis uses a combination of statistics, regression analysis, charts, and graphs to
allow you to look at the market and trading pairs in a graphic fashion. It is also based upon the theory
that you should trade on the charts and graph indicators only and totally ignore what the fundamental
information is telling you. Traders who are experienced or certified in technical analysis are putting
their faith in their craft based upon three ideas.

There is usually a lot of noise in the information that is presented in currency trading. This
noise is the information that, if followed, can lead you into the wrong trade times even though you
have the right idea of what to trade. The idea behind technical analysis is that you allow the charts and
graphs along with the fundamental information to filter out the noise, and allow you to hear a clear
signal as to what to trade and when to trade it.

If you learn to use technical information and like to produce your own technical
analysis, then you might want to study and apply for the Chartered Market Technician
(CMT) designation and qualification. To qualify for the CMT, you need to pass three
exams based upon technical analysis. Information can be found at www.mta.org/

eweb/StartPage.aspx.

There are several basic charts and indicators that are used in technical analysis. Whether you
use a candlestick chart, regression analysis, Elliott wave principles, resistance levels, or moving
averages, the ideas are the same You take the mathematics behind the currency pairs and either draw
Iines or use statistics to come up with estimates as to when is a good time ID trade. Some charts can
be drawn quite easily on your FX trading platform directly. In order to do this, go to your trading
platform and go to the section marked "Technical Indicators." You can then select the indicator you
would like to use, and that technical indicator will then be drawn on your chart. Other indicators are
more active in nature; you draw them on the chart by selecting the indicator, and then drawing the
line from the points you are Irving to analyze.

An Example of Charts and Indicators

This is a picture of a chart from Windsor Brokers showing the EUR/CHF pair a fifteen-minute chart. As
you can see, the euro is getting stronger against the Swiss franc. At the end of the time frame the