Filed under Forex Strategies
If you ask me “What is my most important step before I place a trade?”. The answer will be CHART ANALYSIS.
I bet most of you have heard of forex chart analysis from those forex books that you have read but how many of you actually know how to do it. Therefore I am going to share with you the exact way I do my forex chart analysis.
What I did for my chart analysis is call “Top Down Analysis” and this is something all traders must do before placing any trade.
Here are the steps you need to do the Top Down Analysis
Step 1: Open your highest timeframe chart and properly check the trend for that timeframe. The best way to look for trend is through the EMAs and I have written about it at my blog post “Forex Trend Identifying Method”
Step 2: Once you obtain the trend, you should look for candlepattern that will constitute a forex reversal in trend. For this, you can take a look at my previous post “Forex Reversal”
Step 3: Draw support and resistance line on appropriate position to help you take note of certain price level. I have also posted a post to teach you how to make use of support and resistance.
Step 4: Once this is done, I will then move to the next higher timeframe to repeat the whole process of Step 1-3. All you have to do is to continuously move down to the next timeframe to do all this forex analysis.
Once you establish the trend and patterns in every timeframe, you can then move to a lower timeframe to help you locate a trade. Do note that the higher timeframe will have higher weightage on your trade.
If you see a chance of price moving down but at the same time you also see a stochastic oversold scenario on the lower timeframe. You should trust what you see at the higher timeframe and look for chance to enter a trade when both of them starts moving in the same direction.
REMEMBER: “NO TRADE IS BETTER THAN A LOSING TRADE”