Many Forex traders simply rely on expert advice to define their strategies, which is often effective because the experts typically have excellent foundations of technical and statistical knowledge. However, although analyzing Forex charts efficiently requires a certain amount of technical savvy, there are some techniques that will allow you to investigate data without turning to the experts. In fact, using the most time-honored techniques will allow you to start on the path of becoming an expert investor yourself. Charts are available with up to the second data at many sites, specifically at FX Street. Taking a deeper analysis into charts makes the difference between a good and an excellent trader.

Technical indicators are used to break down the data on charts, so rather than just seeing the trends, one can understand the strengths, volatility, trajectory and cycles of specific listed statistics. A great site for further reading is www.forexcharts.org.uk. The Forex indicators every trader should familiarize himself with are the following three:

1. Moving Average Convergence/Divergence. This chart type follows trends and identifies momentum. The standard MACD is the 12-day Exponential Moving Average less the 26-day EMA, based on the closing price of a given currency. Typically, one will see a 9-day EMA plotted next to the standard EMA to show a smaller time frame and better review the time span trend. Against the 9-day EMA, the MACD is positive when above and negative when below. From here, traders can decide how they want to hedge or engage in other trade actions.

2. Average Directional Movement. For the exact formula on how to purchase based on this formula, have a look at the HubPages site. Essentially, the ADX moves from 0 to 100, although anything above 65 is highly unlikely. Most experts follow this oscillator as such:

  • 20 and below is a weak trend
  • 40 and above is a strong trend.
  • 65 and above is an excellent trend

 

A final tip to keep in mind is that when the indicator moves from below 20 to above 20, it generally indicated the beginning of a new trend.

3. Relative Strength Indicator. The RSI is an indicator of how purchased a certain data group is, and whether or not this certain currency has been purchased more, less or on target with how it is valued. By measuring the speed and change of price movements, the RSI can give a trader a good idea of whether or not to make a move on buying or selling. Just as the ADX is from 0 to 100, so is the RSI. However, in this case the numbers translate as follows:

  • 70 and above indicates the currency is over purchased
  • 30 and below indicates the currency is oversold.
  • The general trend can be identified using this chart by simply seeing the timeframe of such purchases.
  • RSI Calculation is as follows:

 

RSI = 100 – 100/(1 + (Average Gain/Average Loss)
Charts indicators are a technical analysis that any investor looking to capitalize on market trends must understand. The above-listed 3 indicators are a good start exploring more market data.