How to Use Currency Trade Charts

Study a currency chart before placing your trade.

Currency charts can be used by a trader as a guide for entering and exiting a position on the foreign exchange market. Currency charts are included with most brokerage accounts and may also be used by a trader who has a standalone charting program. Some advanced charting packages can be coded to automatically enter and exit trades, based on a system that is designed by the trader. An advanced charting program also gives a trader the ability to create customized indicators. These indicators provide a more detailed analysis of the price movement for a particular currency.

Instructions

1. 

   Set up your currency charts.

   Fill out an online application with a currency brokerage who has charting built into the trading platform, and fund your account using one of the specified methods of deposit. Download and install the required trading and charting software from the broker's website after your deposit is confirmed. Check your email for a response from the broker, which will include your username and password, and use these to login to the trading and charting platform.

2. 

   Pick one of the major currencies to trade.

   Open a currency chart in your preferred time frame or open multiple charts if you use more than one time frame to make your trading decisions. Choose a candlestick, bar or line chart depending on your preference. Add technical studies, such as one or more moving averages, price oscillators or any indicator you use as a guide for trade entries.

3. 

   Enter a trade using the chart as a guide.

   Place a currency trade after your charting indicators signal an entry based on your trading methodology. Confirm that the trade was executed correctly by checking the trading platform for an open position. Set a stop loss exit point for the amount you are willing to lose in case the currency trade does not move in your favor.

4. 

   Follow the movement of your trade on the chart.

   Place a profit target exit for your trade, unless you intend to leave the target open until you manually exit the position. Follow the currency trade on your charts as the price action unfolds. Verify the trade exit was correctly executed, once you have either closed the position for a profit or been stopped out for a loss.

5. 

   Exit your trade using the chart as a guide.

   Reconcile your brokerage account to ensure that the balance reflects the closed currency trade. Contact the broker by phone or email if you find any discrepancies with either the entry or the exit price of the trade. Return your chart to the set up you use for your trading decisions and wait for the next entry to occur.

Tips & Warnings

• You do not have to access the broker charts if you already have a standalone charting program that you use for currency trade analysis. Use the broker software only for placing trades, unless this feature is also incorporated into your standalone program.

• Pay attention to any upcoming economic announcements, and watch your currency charts for spikes in price that are caused by other traders reacting to the news.

• Have a dial up modem as a backup in case of a network or cable modem outage.

• Always keep your currency broker's phone number handy when you trade. Call and ask the broker to execute a trade if your computer will not connect to the Internet.

• Do not place a trade based solely on the information displayed on a currency chart, since the data may lag depending on the speed of your Internet connection.

References

• Investopedia: Make the Currency Cross Your Boss
• Investopedia: Getting Started In Forex

Resources

• U.S. Commodities Futures Trading Commission: Foreign Currency Trading