The study of charts has become big business in Forex Trading and this is explained very well in the Ed Ponsi book “Forex Patterns and Probabilities” which is published by Wiley Trading and is available from Amazon in the US by clicking here: USA or Amazon in the UK by clicking here United Kingdom.

Ed Ponsi is a forex trader and educator and the forex patterns and probabilities that he reviews in his book are as a result of him trading the currency markets using his real-world specifics rather than some general concepts
of FX strategy.

Do not shy away from Ed Ponsi’s real-world strategies that he applies to foreign exchange risk management as when you learn how to apply them when trading forex will reward you

Forex Patterns And Probabilities: Forex Pips, Forex Charts And Forex Trends

• Forex Trends

The Forex markets have been studied for over 100 years and over that time trends have repeated themselves and patterns have become consistent and fairly reliable. It is very important to understand that prices move in trends and those traders who trade with the trend are more successful. Finding the trend will help you become more aware of the market direction and is a fundamental element to the forex patterns and probabilities you will use to formul

ate your trading strategies as a professional trader in currency trading.

Always find the trend and trade with it, not against it. This applies even if it takes days or weeks for a new trend to become obvious.

Looking at the charts and drawing trend lines is the most common form of technical analysis. A trend is usually when 3 or more lows line up. A market that is trending up is making a series of higher highs and higher lows and you can draw a line connecting the bottoms roughly, this is a support line.

The market is trending down when it is making lower lows and lower highs, if you draw a line connecting the tops you have drawn a resistance line, which will be shown in the forex patterns and probabilities book.

• Forex Time Based Charts

Traders have different times they wish to trade in, some are comfortable using 1 and 5 minute time frame charts others prefer 15 min or 1 hour charts placing 4 to 10 trades daily and others prefer to place a trade and let it run for several days, weeks or longer. This is a personal decision. There is not one time period that makes more money than the others.

When reading the charts it is a good idea to look at 3 different time frames. The reason for this is the largest time gives a general over view of what is happening, the direction of the market, then zooming in to the next level shows what is going on more recently and when you should enter the market and the third and closest time frame is the one where you would actually monitor your trade.

The 3 different time frames can be any combination depending on your chosen trading time and this will affect your forex patterns and probabilities.

A daily chart might show a downward trend but the 5 minute charts could show an upward trend and the 1 minute charts show a downward trend, these charts would be of no interest to anyone leaving a trade to run for weeks. Again there are software programs available to help identify trends and placement of orders which will be discussed in forex patterns and probabilities.

Having some knowledge I believe is useful even with automated programs.

Forex Patterns And Probabilities: Time Based Forex Charts

There are 3 main types of charts, the candlestick chart, bar charts and line charts.

They all come in many different time periods, 1 minute, 5 minutes,10 minutes,30 minutes, 1 hour, 2 hours, 4 hours, 1 day, 1 week and 1 month plus others.

With the bar chart each bar represents one period of time (as above) and on each bar there are 4 marks. The highest point reached in that time frame, the lowest point, the opening point and the closing point. Those 4 points tell you what has happened in the market for that time.

The candlestick charts give exactly the same information with the candlestick body changing colour on a high (bullish) and changing back on a low (bearish) market

The line charts simply chart the direction of the market moving up, down or sideways. You usually have a choice of what sort of chart you want from the broker of your choice.
Trade in the time frame you feel comfortable with. There is no right or wrong time frame.

Forex Pips

This is the smallest increment the value of the currency can change by. The pricing of the currency is always showing the value of one currency against another. For example EUR: USD 1.4443 ( 1 Euro is worth USD 1.4443). The last number shown on a price (for example the 3 in the following price 1.4443 ) is known as a pip. If the value of the Euro went up 20 pips it would be shown as EUR : USD 1.4463. All value changes are referred to as pip changes.

The main objective of trading is to gain as many profitable pips as possible. The more dollars you are trading and the higher your leverage the higher the value of the pip is worth to you. Trading a full lot of 100,000 with leverage the pip value is around $10 however with a mini account you are trading 1/10th of the size therefore a pip is worth $1.00.

Traders have different goals depending on their   forex patterns and probabilities short term traders might look at gains of 20 pips per trade, for a longer term traders will be looking at 100 plus pips.

Forex Patterns and Probabilities is a post from: Great Forex World