Charting the Range

Charts are the best way to asses the markets! Not only do they give you a visual of where price has gone but they can help you limit risks.

I like to start with a longer term chart say daily or weekly like this one: GBP/USD
I start drawing on it - Arrows and lines etc... This weekly chart helps me determine a full range of activities for a pair before I go any deeper. My usual indicator is MACD and I sometimes use Slow Stochastics and the RSI indicators

The lines on these indicators are 0 (zero) for MACD, 20 & 80 for Stochastics, and 70 & 30 for RSI For now it's just MACD



Here is what it looks like after I draw on it




This chart is showing us that the GBP has fallen a great deal against the mighty Greenback. This is a good thing to know

The moving average numbers I use are as follows: 14Ma (red), 28MA (blue), 50MA (green), 100MA (purple), 200MA (always black) I always colour them different colours for easy identification of which one it is.

After defining the weekly chart ranges I drill down to the daily charts to get a closer look -

After viewing the Daily chart I know several things: 1 this pair is heading lower - 2: it has moved 7000 pips lower! - 3: my indicator is showing that the move might not be over




Next I look at the 4 hour and 1 hour charts

Here on the 1 hour and 4 hour charts we can get a picture of what might happen next - The MACD is in really low teritory and may provide us with a bounce back towards Zero after a heavy sell down. This chart is taken just after the US inaugeration of President Elect Barak Obama

Now lets drill down to a 30 min chart to see of the 4 hour is reversing yet

This may provide us with a long opportunity but one must temper the trade to risks involved. The MACD is curling upwards but has not yet passed the Zero line so waiting for a confirmation may be the best approach.



Charts are a great tool and can help you figure out where your risk is and how much it can be.