Forex Charts Book. Series of Free Forex ebooks

Educational guide for beginners on exploring Forex charts


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How to recognize and trade different Forex chart patterns

Types of charts
Chart patterns

The very first look at a newly opened chart usually gives traders a little or no clue what the market is currently doing.

newly opened chart

It usually appears like that wavy indefinite graph you see below.

A trader must «reorganize» it into a very clear picture to be able to trade.

Analysis usually starts with defining the trend.
It may be needed to switch to a bigger time frame (hourly, daily) to see where exactly the market price is heading: up or down.

Having done that a trader can plot a trend line.
Note the rule of placing trend lines for uptrend and downtrend.

uptrend sketch

downtrend sketch

For uptrend a trend line is plotted below the price action to indicate a support level.

For downtrend — above the price action to mark the level where resistance occurs.

For more information about trend lines visit:

«Always trade with the trend»... or at least try to — the gold rule in trading. That's why we want to find a direction of the trend.

Price can form channels. A channel is a corridor with parallel lines in between which the price moves.

The longer the price stays in a channel the stronger the channel becomes.

up-channel forex

side-channel forex

Trading strategy: watch for the price attempting to trade out of a channel. Once the first bar is closed outside the channel it is time to execute a trade in the direction where this break-through has occurred.

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