We are what we think; all that we are, arises with our thoughts; with our thoughts, we make the world.

3-Forex Charting

Forex charts enable the Forex Trader to view and analyze the market. Visual representations of currency movements, paired with tools to determine trends, potential retracements and extensions, help the forex trader to make decisions about good entry and exit positions.

I prefer MTI4.0, http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog), as my charting software. It is very easy to learn and comfortable to use. I have written a series of posts showing you some of the tools, indicators, and systems I have found helpful.

Drawing trendlines help determine the direction the market is going.

Drawing trendlines help determine the direction the market is going.

My charting software from Market Traders, MTI4.0, makes it easy to draw trendlines. The green line is a trendline and it makes it very easy to see that the market is making lower LOWS and lower HIGHS. We are in a downtrend.

Ths will would be a good time to sell first and buy later.

Can you see how the market moves in waves, up and down? Overall we are going down. The best time to sell is after we hit a high and we start moving down again.

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I love to create a template for each time frame. I have a weekly, daily, 8 hour, 4 hour, 1 hour, 30 min, 15 min, and 10 min template.

The template has the settings I like. I do not like the horizontal and vertical grid lines. I do not like cluttering my charts with the names of the systems and indicator I am using. I like to see a countdown to the next candle. I also like to set the size of the candles for my viewing space.

It is easy to apply the template. I click on F8, select the template, and voila! My work is done. It is amazing how fast it is for me to create a page of charts for a brand new currency when I use templates.

WEEKLY USD/CAD

WEEKLY USD/CAD

8 HOUR USD/CAD

8 HOUR USD/CAD

4 HOUR USD/CAD

4 HOUR USD/CAD

1 HOUR USD/CAD

1 HOUR USD/CAD

15 MIN USD/CAD

15 MIN USD/CAD

10 MIN USD/CAD

10 MIN USD/CAD

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MTI Trend Scalper 4.0 is my favorite system

MTI Trend Scalper 4.0 is my favorite system

I love using the MTI Trend Scalper 4.0 system. This systemwas developed by my mentors, http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog).  It consists of several different indicators.

When the candles are above the red automated trendline, I think bullish. I look at the Stochastic RSI indicator at the bottom of the chart (blue line with dots). When I see it hit the bottom and turn up, I look for a bullish candlestick formation and enter the trade. I set my stop below the low and my limit at the previous high.

MTI Trend Scalper 4.0

MTI Trend Scalper 4.0

Voila! I hit my limit and captured 15 pips!

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The expansion tool helps us determine where to buy and sell.

The expansion tool helps us determine where to buy and sell.

The market tends to move in patterns of AB=CD. Using the expansion tool uses the values of A,B, and C to calculate where D will be.

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The Fibonacci tool helps us determine where to buy and sell

The Fibonacci tool helps us determine where to buy and sell

The market moves in waves and the fibonacci tool is wonderful for predicting how far the market will go. The market tends to move from a to b, retrace to c, and extend to d. My mentors, at http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog), have spent a great deal of time helping me to learn the fibonacci ratios and how to sell c and buy d.

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The Bi tool will show the number of pips I am risking in a trade

The Bi tool will show the number of pips I am risking in a trade

I have determined where my stop should be and where I am entering the trade. I use the Bi tool to view the number of pips I am risking. The Bi tool displays a box in the upper left hand corner of the chart. It shows the upper price and the lower price and the range of pips. Range=56 tells me that I will be risking 56 pips.

The Bi tool helps me determine where my limit should be

The Bi tool helps me determine where my limit should be

I want to make sure I have at least a 1-1 risk/reward when I trade. So I have calculated where my limit needs to be. In order to earn 56 pips on this trade, my limit needs to be at 92.48. The Bi tool shows me this.

I moved the tool to where I saw 56 pips show in the box, and discovered I needed to place my limit at 92.48.

The Bi tool made this trade easier

The Bi tool made this trade easier

You can see the results of my trade. I hit my limit and captured 56 pips. The Bi tool made this much simpler.

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A page displays several charts.

A page displays several charts.

Several charts can be displayed at the same time. I know it is hard to see the charts. I had to shrink this considerably for it to fit on this page. I have a 24″ LCD monitor.

My page is showing several charts for the USD/JPY pair. I am displaying the Weekly, Daily, 8 hour, 4 hour, 1 hour, 15 minute, and 10 minute charts.

One of the important things my mentors at MTI, http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog), taught me, is to look at the longer time frames when I trade. The longer time frames dictate the smaller time frames. But in order to limit my risk, I need to enter a trade using a smaller time frame.

It is also possible to build a page showing 10 minute time frames for multiple currency pairs. I found this especially helpful when I am scalping (trades I want to enter and exit quickly).

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chart2

A chart represents the change in price of a currency-pair over time. The price is the y-axis (shown on the right), and the time is the x-axis (shown on the bottom).

This is a 4 hour chart. Each candle represents the price fluctuation that happened over 240 minutes.

You can see that the price of the USDJPY is going down, it is in a downtrend. This is a great time to be a bear and buy first and sell later.

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This letter is really going to p&!# some people off!! I’m sorry about that, but it’s time for a dose of reality.  Do these headlines look familiar to you?  I get a new one in my mailbox every week. 

“The new XXX Forex Robot is taking the forex community by storm!!”

“There is no other way to put it, the buzz surrounding the XXX Forex Robot is….Huge!!”

“It’s official… the boundaries of Forex Artificial Intelligence robot trading has been pushed forward.”

“The XXX Forex Robot went live yesterday and, as I predicted, it rocked the Forex industry…”

“XXX Forex Robot will change history…”

“So after 24 hours, the industry buzz behind the XXX Forex Robot is reaching  fever pitch!!”

It’s a seductive concept …. the Money Machine.  Let’s be honest here. All of us in our heart of hearts dream about finding the “Holy Grail:” The infallible system that tells us to  buy at the bottom and sell at the top. Taking it one step further, we want this system to run on “auto-pilot.”  We just get up in the morning, start our “Money Machine,” and then collect our profits a little later in the day on our way to dinner in Paris. (As long as we’re fantasizing, we might as well have a private jet.)  Ok, now let’s get real. The money machine doesn’t exist. Billion dollar companies, that can afford banks of super-computers and teams of programmers have gone bankrupt trying to create that “Holy Grail.” (Does the name Enron ring a bell?)

Wall Street brokerage houses consistently lose millions on programmed trading. Do you really think you are going to find a “Money Machine” that’s going to run a few lines of code on  your home computer and automatically fill your bank account?  Of course not. Yet many traders wind up jumping from one trading program/method to the next looking for just that. They don’t make the commitment necessary to succeed with any of them because when  they start one method, they are already looking for the next. I know that’s the case because I’ve “been there and done that.”  The fact is that no programmed trading system can work because every day is different than every other day there ever was. Market movement on any day is the result of all human experience up to and including that day. 

So how do these little desktop robots show such great back tested results?  Simple, they are simply algorithms designed to show great profits on one set of historical data.  How it does going forward is anybody’s guess.  It’s the ultimate in curve fitting. That’s why each robot can only “trade” one currency pair in one time interval. In other words, these “Robots” are designed to be back-tested.  Then they are updated monthly so the most recent data can be used to maintain the illusion. Essentially, they are picking the winner of the race after the race has been run!

The idea behind most of these robots is to trade when the markets are very quiet and take very small profits from the random movement of the market while using very wide stops.  This allows a lot of “wins” in a row (maintaining the illusion) before a big loss wipes you out. If you really want to be successful trading you have to put in the effort to learn to trade, and use the “Secret Weapon” that each of us has.

Scientists have never even come close to producing a super-computer as powerful as the human brain. We can process amazing amounts of data instantaneously. That’s why systems don’t work, but trading methods do work. When you look at a chart you can easily understand the national, international and financial forces affecting that chart.  Yes, even technical trader should be aware of the world around them.  Do you really think what happens in the equity markets don’t effect the currency markets (or visa versa)?

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