Forex charts are a tool that all traders have to use. It is important that you know why you are going to be using the forex charts. You also have to know about the mistakes that you could be making. When you know about the possible mistakes you can make you can avoid them. Traders who do not consider the mistakes they can make with forex charts often lose money through incorrect analysis and other issues.
Why You Use Forex Charts
There are two general types of forex traders and both of them will use forex charts. However, the use they have for the charts will be different and you need to understand where you fall. Fundamental traders primarily use fundamental analysis to determine market movements. These traders do use forex charts to determine the long-term direction of the market.
It is technical traders who use forex charts more than anyone else. These traders use the charts are their primary analysis of the market. Technical traders will use the charts to determine long-term directions, but they will also use them to determine their entry and exit points for their trades.
Setting the Wrong Indicators
One of the biggest mistakes that all traders can make with their forex charts is using the incorrect indicators. When you place an indicator on the charts you need to know what information it should be giving you. You also have to know what parameters you need to set for the indicators. The way you are using the indicator will affect the parameters you need to use.
If you are using moving averages to determine points in conjunction with Bollinger Bands you have to use parameters that reflect this. However, if you are going to be using ribbon moving averages then you have to know the multiple parameters that you need. It is best that to test the different indictors and parameters before you actually trade with them.
Having Too Many Indicators
A common mistake that traders make is having too many indicators on their charts. This is something that can easily happen when you test the different indicators. You can also have this problem if you are using a primary and supplementary strategy. The different indictors you have on the charts could relate to different strategies. It is important that you understand why you have all the indicators so you know what you should be doing.
If you have been trying out the indicators then you have to remove the ones that you are not using. Any indicator that does not add something to your trading must be taken off your charts. If you leave the indicator on the chart you may become confused when you look at the charts and place bad trades.
If you use two strategies to trade the market you have to consider using different charts for each strategy. A lot of charting software programmes allows you to have different charts with different indicators. Having the indicators for both strategies on your forex charts will cause confusion because they are looking at different aspects of the market.