Posted by forex at 5:48 AM
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1. Chart any Forex currency that you wish to trade. Your broker will likely provide dozens of different currencies. Type or select the desired currency in your charting software and create an intraday chart that updates each bar every 15 minutes.
2. Apply a moving average study to the chart. Moving averages are among the most common technical indicators in Forex and other financial markets. They simply show how the average price is changing over time, and they help you see past the volatility of each individual price fluctuation. You can choose any kind of moving average that you prefer. If you have no preference, start with a 10-period study, which averages prices over the last 10 bars.
3. Compare subsequent peaks in the price chart with the direction of the moving average. This will help identify if a trend is occurring. If the moving average is sloped positively, look for a pattern of 'higher highs and higher lows' in the prices (see References 2). This is a good indication that prices will continue to rise.
4. Buy into the Forex currency if it is in an up trend. The exact entry point for any trade is a matter of personal preference, but some traders minimize their risks by waiting for a decline in prices off a recent peak in the chart. If the trend continues, the price will reverse from the decline and continue to move toward another new high.
5. Sell, or close, your Forex trade if the up trend fails to continue. You can identify a trend reversal by a change in the slope of the moving average, or a break in the pattern of higher highs and higher lows. For example, if prices decline and fall lower than the most recent low, the trend may be changing.