Most recommendations indicate that when trading forex rates the trader should consider using the 5 or 15 minute forex charts to trade. However, while this is a profitable method, the weekly charts have also proved extremely effective. In order to determine which will work with your trading style you should examine why you use these charts and the difference in trading with them. Once you discover this you should look at why you wound benefit from trading with forex rates weekly charts.
Why Use the Forex Rates Weekly Charts
The very first thing a trader must do when considering using forex charts is whether they will be beneficial. Which is better, the weekly charts or the 5 and 15 minute charts? As is stated, many traders will opt for the latter as they provide a better indication of the current market movement. Yet, this is not the only chart option available.
If the trader is viewing a new currency pairing and is unsure what the pair will do it is better to view a weekly forex chart trading. This approach does take longer than the shorter charts and requires patient, but there is a greater chance of a profitable outcome.
The Chart Differences
When trading on the 5 minute forex charts the trader will be looking at profit ranges of approximately 100 to 200 pips. While this may seem enough for one trader, the weekly forex charts will present with ranges of approximately 1000 pips or more. It should be noted that despite trading with higher pips, it is only the time frame of the trade which alters. Trading on the weekly chart will take much longer than on the minute chart. This means one will have to wait a while before seeing a trading result.
The Risks of Using Weekly Charts
Despite the larger profit margin when using forex weekly charts, one should also consider the increased level of risk. The primary risk is that you may potentially lose as much as you could gain. However, this is something which the trader will face with all trades regardless of the charts used. The benefit of these risks is that the longer time frame allows one time to stop the trade or change the parameters if needs be.
How to Trade With the Weekly Charts
Once one has a better understanding of forex charts and why a trading strategy would benefit from using the, you may want to start trading with them. To employ this method you need to review the currencies moving averages on a weekly basis. These averages will tell you whether you should buy or sell the chosen currency pair.
A currency pairing that is moving slowly indicates a poor average. This average is usually lower than 200 pips per week. If you continue trading with this pairing, the chances are you will incur losses. However, if the average is more than 200 you should consider buying the pairing and increase the chance of profits.