Forex trading can be fun, exciting, and full of promise. It can make one rich in a short period of time and many have built full careers out of it. However, most people make many mistakes as beginners in the Forex trade and this may
discourage further investment and at times even bankrupt others. Some of these avoidable mistakes occur when using Forex charts. Here are some of the most common mistakes committed by beginners when using Forex charts.
Technical Tools
The most common mistake made by new entrants into the Forex market trade is the use of too many technical tools at the same time. Most of these tools are very useful while some do not seem to add any meaningful value. However, no matter how useful any of them is, using too many of them or not knowing how to use the ones you choose may lead to confusion and ultimately, financial loss.
The most common mistake made by new entrants into the Forex market trade is the use of too many technical tools at the same time. Most of these tools are very useful while some do not seem to add any meaningful value. However, no matter how useful any of them is, using too many of them or not knowing how to use the ones you choose may lead to confusion and ultimately, financial loss.
Starting your trade with Fibonacci just before jumping to Pivot points before switching to Relative Strength Index (RSI), to again jumping over to Moving Average Convergence-Divergence (MACD) before going to Bollinger Bands will confuse your head and your investment portfolio. Choosing between one and three technical tools will produce far more satisfying financial results, and eliminate the use of headache medication!
Analyzing Indicators
Firstly, one has to learn when to use a particular indicator. In Forex trade, timing is everything. The indicators usually work to attempt to predict future price behaviors. However, this should not be followed strictly as such predictions are not cast in stone. The trader needs to put more focus on price momentum and ride on the advantageous momentum. Basing your trade decisions on at least 3 candlesticks is a much better and safer way to trade. This may produce lower profits, but it is a system based on facts rather than gut feelings.
Firstly, one has to learn when to use a particular indicator. In Forex trade, timing is everything. The indicators usually work to attempt to predict future price behaviors. However, this should not be followed strictly as such predictions are not cast in stone. The trader needs to put more focus on price momentum and ride on the advantageous momentum. Basing your trade decisions on at least 3 candlesticks is a much better and safer way to trade. This may produce lower profits, but it is a system based on facts rather than gut feelings.
Time Frames
Forex traders should realize early on that time frames are extremely essential. You need to assess the time frames before you trade. This should be done by analyzing the charts of the time frames immediately before and immediately after the trade period. Long term positions may require you to look at time frames of 1 hour, one day, or even a week rather than 10 min, 15 min, or 30 min charts. On the other hand, short term trades would be more effective if one analyzed charts covering shorter time frames. One should also confirm that the chart times correspond to the opening and closing of the candle.
Forex traders should realize early on that time frames are extremely essential. You need to assess the time frames before you trade. This should be done by analyzing the charts of the time frames immediately before and immediately after the trade period. Long term positions may require you to look at time frames of 1 hour, one day, or even a week rather than 10 min, 15 min, or 30 min charts. On the other hand, short term trades would be more effective if one analyzed charts covering shorter time frames. One should also confirm that the chart times correspond to the opening and closing of the candle.
Time Zones
Traders should be careful about the time they enter or exit a trade. The x-axis of the chart shows the timeline and the time may reflect the broker's time zone, GMT, or other time zone. The trader should be careful to convert this time to their own time zone or the time zone of the market they are operating in.
Traders should be careful about the time they enter or exit a trade. The x-axis of the chart shows the timeline and the time may reflect the broker's time zone, GMT, or other time zone. The trader should be careful to convert this time to their own time zone or the time zone of the market they are operating in.
Price
Most beginners either do not know, or keep forgetting, that the prices shown on Forex charts are usually the BID price rather than the ASK price. Keep this in mind to avoid operating at a loss.
Most beginners either do not know, or keep forgetting, that the prices shown on Forex charts are usually the BID price rather than the ASK price. Keep this in mind to avoid operating at a loss.
Shawn James has 7 years experience in the Financial Markets, for PRO Investment Bank as an Investment Analyst, before becoming a Forex trading expert.
If you have more Forex questions please post them online.
"My best tip for every new trader is to open Metatrader demo account that will provide you with a number of opportunities such as trying your forces on the Forex market, learning about trading terminal possibilities and testing your trading strategy with no financial investments".
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