Technical analysis traders on FOREX have more than a few techniques and charts they utilize when attempting to predict the price movements by analysis of historical price activity. The most common technique and also the simplest way for understanding the general idea is the "high-low breakout" technique. Any chart has sequence of bars that are either going up, down or sideways. Almost any given day's highs and lows are different from the ones of the day before or the day tomorrow. This means today's bar will make a higher "high" or a lower "low" compared to yesterday.
FOREX traders and investors find this information very powerful and are always trying to predict tomorrow's outcome. In order to foresee a trading opportunity one should find the average daily gap between the high of yesterday's high to the high of today's bar and the average daily distance between the low of yesterday's bar and the low of today's bar. If you want to try and do it yourself, start by tracking the highs and lows of each day. Then, deduct the high of today from yesterday's high and the low of today from yesterday low. When you have a decent amount of information (accumulated over a month or more) in a chart with five columns, date, open, high, low and close, you can calculate an average. After you have this data you can start calculate down today's high minus yesterday's high (TH-YH) and yesterday's low minus today's low (YL-TL). In the "TH-YH" column write an entry only if today's high is greater than yesterday's high and in the "YL-TL write an entry only if today's low is lower than yesterday's low.
Buy using this information you can predict tomorrows higher high and lower low and by that we can apply this knowledge to our FOREX trading. There are loads of ways to trade this setup (such as take this down to a 1 minute chart and scalp the market with a very tight stop). No matter how you choose to trade it, don't forget to take note of the previous day's high and low.
Mia Milis is an independent trader and provides financial advice regarding foreign exchange to several institutions as well as private individuals. Being an Internet enthusiast, she has taken up to provide advice through her brilliant articles, and in recent years has also founded theforexblogger.com in order to provide a platform online traders worldwide could share experiences through. To learn more about the FOREX market, visit Mia's website at http://www.theforexblogger.com.
About the Author
Mia Milis is an independent trader and provides financial advice regarding foreign exchange to several institutions as well as private individuals. Being an Internet enthusiast, she has taken up to provide advice through her brilliant articles, and in recent years has also founded theforexblogger.com in order to provide a platform online traders worldwide could share experiences through.
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