Page 70 - Ultimate Guide to Currency Trading

fifteen minutes. At the end of the fifteen minutes the close price will be indicated by a notch on the
line to the right of the longer up and down line. On a full-size laptop computer with a 15- or 17-inch
screen, the lines on a fifteen-minute chart may be 1/2 to I centimeter long to indicate the movement
of a pair, such as the EUR/CHF, within that time frame. Each fifteen-minute range line is close to
another, and the total effect is a semismooth line across your computer screen showing your trading
plat-form and its EUR/CHF chart.

It sometimes helps to look at a range of time frames on your bar charts. You can look
at a one-day chart to get an overview of what , direction the currency is moving, and
ALERT switch to ever-shorter time frames. At the very end you can use a thirty-second chart

to time your FX trade precisely.

Using Moving Averages to Time Your Trades

After you have signaled your trading platform's software to draw a bar chart for the currency pair
EUR/CHF, the next technical indicator that you can use is the 50-day moving average and the 200-day
moving average. These moving averages use statistical formulas of the openings, closings, or averages
of the EUR/CHF pair for the past 200 or 50 days on a rolling basis. This means that 200-day moving
average will drop day 201 and add day 1 the next day you look at the chart. Also, the chart is rolling as
to time; i.e., if you are on a one-hour chart, the 200 days x twenty-four hours will be looked at, and
then in one hour the 199 days plus twenty-three hours will be factored in plus the most recent hour of
the trading week. The same is true for the 50-day moving average.

Once you have the fifteen-minute (or other time frame) bar chart drawn on your trading
platform, you can easily use one of your drop-down boxes in the "Technical Indicators" section of the
commands in your software. You will most likely see a series of commands in the "Add Technical
Indicators" drop-down box: Select the one that is marked "Moving Average." You can draw any
number of days for this indicator. First make the selection of a 200-day in a contrasting, colored thick
line, and then in a different colored thick line make the selection for a 50-day moving average.

This will draw two lines across the chart. In this example, the EUR/CHF is shown on a one-hour
chart. The jagged up and down line with the valley are the effect of the one-hour bars showing up in
the chart all compressed together. The 50-day and 200-day moving averages are shown by the
graceful lines that somewhat follow the curve of the one-hour bar chart. Since the 50-day moving
average is more sensitive to changes in price, it more closely follows the bar chart: It is shown in the
example with the lighter line. The 200-day moving average is less sensitive and moves in an even more
slowly sloping pattern. The 200-day moving average is shown by the darker line.

After you have used your trading platform to draw a one-hour bar chart, a 50-day moving
average, and a 200-day moving average, you can then use the moving averages as indicators. The
easiest way to use the moving aver-ages is to draw the 50- and the 200-day upon each other and look
where they cross. As you can see, in this example, they cross in three places. At each point where the