Once you learn how to analyze futures trading charts, you won’t need to rely on other’s theorizing and ‘expert advice.’
You profit in futures trading by calculating the present and future performances from the results of past performances.
The blur of numbers and all the little facts on the charts can seem cumbersome initially, but it’s not as difficult as it looks.
There are two approaches to analyze the markets. One uses technical analysis, and the other uses fundamental analysis.
Fundamental analysis pertains to the erratic behaviors and unanticipated events that influence the economics of a certain entity. This approach primarily looks at the political, social, and economic force that drives the supply and demand of a country’s currency. Government policies, bank policies, natural disasters, social stability, and overall economic trends are considered. This method is handy when making mid to long term investment decisions. Although it’s not the best for Forex day traders, the more you know, the better off you’ll be.
Technical analysis attempts to forecast price movements by analyzing historical price trends, volumes, open interest, etc. This method is carried out based on the thought that ‘history repeats itself,’ and relies heavily on futures trading charts and graphs. This data can help you anticipate what is expected to happen to prices over time. It’s easy to see that you’ll need, at the least, one charting software to scientifically plot your own strategy.
Futures trading charts can give you an edge when you’re able to identify trends so that you can time your entry and exit. When you can see this data in chart form, it’s of more value because:
* You are able to visualize the direction of price movement
* You can see price patterns which suggest market buying and selling pressures
* You will be able to easily identify up-to-the-minute price trends and when changes in trend occur
To be able to distinguish a trend in futures trading charts correctly, you have to have a firm grasp on the basic concepts surrounding foreign exchange trade.
Some people trade short term, some medium term, and some long term. All three types of traders may benefit from the use of futures trading charts, just adapted to their own trading time frame. Time frames are anywhere between one minute to years. Many of the popular are the one minute, 3 minute, 5 minute, 10, minute, 15 minute, 30 minute, one hour, two hour, four hour, daily, weekly, monthly and yearly.
It’s important to try to use a longer term time frame on your day trading chart if you intend to understand the big picture. Therefore if you trade using the ten minute charts then it pays to consider the hourly and even daily charts so you are able to get more of an idea on what the market is doing. Experts suggest that you first have a look at hourly forex charts to have a general idea of how the market has performed for the past several days. This will give you a chance to track trends and resistance levels of every opening day.
Once you’ve done so, have a look at the fifteen-minute futures trading charts to be able to evaluate what trends are mostly likely to continue for the day or the next days. Studying the five-minute chart last will then allow you to determine the prevailing buy and ask prices, as well as other details you might want to figure out, like the market’s behavior at the start of the day’s trade.
The most basic futures trading chart is a line chart, but traders also make use of bar charts, candle stick charts and point/figure charts.
