Forex traders use different systems to monitor the tricky price changes in the market. For novice traders, they commonly use intraday charts and daily charts as their choice of tools.
Intraday and Daily Charts
Intraday charts measure currency prices for traders in 5 or 15-minute increments, while daily charts present data for price changes for a single day.
But while novice traders commonly use these tools, the success rate in applying these charts are low. It’s not because these tools don’t work or aren’t effective; these tools are not just made for beginners. What many newcomers fail to realize is that these tools require in-depth knowledge and trading skills. Furthermore, by using short-term charts, they may accidentally pit themselves against a more significant overall trend. And, as everyone knows, going against a trend is one way to ruin one’s Forex trading career.
Advantage of a Weekly Forex Trading System
To have a clear view of where and when a significant trend is coming, traders should instead use a weekly trading system.
Traders are in a game of trading with trend or momentum, so they must be fast enough in predicting these waves. By using specific indicators on a weekly trading chart, it brings them ahead of the momentum which gives them have a great advantage. Using this chart also saves them from being caught up in trading on mere minor shifts within a bigger trend.
Another advantage of a weekly Forex trading system is it requires less work than daily or intraday charts. By developing this kind of system, traders can spend more time away from their monitors.
Technical Indicators for Weekly Forex Chart
John Bollinger developed Bollinger Bands which may be related to Moving Averages – though it uses a far more complicated process. It includes the standard deviations above and below a moving average price. Traders who use this indicator can notice that it consists of 3 lines. Bollinger Bands display a possible sell signal if the price move above the upper band. A buy signal is possible if the price move below the lower band.
This indicator focuses on its lenses at the speed of price changes in a currency pair.
If the price increase is speeding up, traders see strength in a currency that can continue. But something can always arrest this trend which can come from many factors.
If traders see a fading momentum on the price increase’s speed, then it’s sending them an important message: it’s time to sell. This strategy also applies if the price increase of a currency pair loses its steam.
Relative Strength Index
This indicator notifies traders if a currency pair is possibly overbought. It can plot relative strength on a scale of 0 to 100.
Traders see the territory as oversold if its reading reaches between 0 and 30, while an overbought territory is defined if its reading hits 70 to 100.
Forex traders would know that it’s time to sell if the reading crosses the center line (at 50) from above. But if it crosses below, traders see it as a buy signal.
Also read: Forex Broker Review: Exness