With up to $5 trillion worth of foreign exchange trades occurring daily, you won’t be surprised to learn that the Forex markets can be a lucrative place to do business. With many new online trading platforms such as ETX Capital, it is easier than ever to get involved and to try your hand at stock trading, making money without leaving your house! In this high stakes arena, there’s the potential for huge gains, but also for heavy losses. So, what can you do to optimise your chances of success?
Traders use charts to monitor the markets and to help inform decisions about when to buy or sell stock. Being able to read these charts effectively is of critical importance and here are three tips to help you avoid making mistakes and thus losing money.
See the Bigger Picture – Chart Time Frames
Charts show you what is happening to stock prices over time and you can change the time frame you are looking at, So, for example, you can look at a charts progress over one minute, five minutes or an hour. New or inexperienced traders can make the mistake of only monitoring short time frames and therefore don’t see patterns and trends that have happened over longer periods of time, stock may look over or under-priced and good to trade, until you look at the bigger picture and realise that in fact it isn’t.
Parabolic or Diabolic – Don’t Use Too Many Indicators
Indicators, such as, ‘Moving Average’ indicators, can help you to analyse what is happening on a chart, but having too many indicators up on screen at the same time can lead to confusion and you can spend too much time trying to work out what they are all telling you instead of watching what is happening to the stock price. Using just one or two indicators will mean you are less likely to loose focus of what is really important – when to trade or when not to trade. ‘Moving Average’ and ‘Bollinger Bands’ are two good indicators to use.
The Top and Bottom of it – Support and Resistance Levels
Support levels indicate a price that stock is unlikely to fall below and resistance levels is a price that stock is unlikely to rise above. It is important that you don’t ignore these because they can be a useful indication of when to buy or sell stock. If you want to “go long”, or in other words buy stock in the hope that the price will go up, you want to buy the stock at the lowest price you can. If you want to “go short” then buying stock at a high price means you will make money when the price falls.
Forex trading is fast and exciting and knowing how to use charts effectively can help you plot your way to success.