How To Analyse Currency Pairs
When it comes to forex trading, there is a ton of analysis involved. You’ll likely read this in every trading for beginner’s guide, but half the battle is learning how to read & analyse the market to ensure you are making the right trades at the right time.
One way in which professional traders analyse the market is through currency pairs – a price quote of the exchange rate for two different currencies.
So, how do we analyse them?
#1 Price Action
Also known as naked trading, or trading without any indicators – this is a process we promote when it comes to analysing currency pairs.
You might be thinking…
“Why? Indicators are a reflection of price action, so why trade without them?”
Although indicators reflect price action, there is a lag in how they present the data. We promote trading without them, and instead, do so by trading raw price action.
Unlike trading with indicators, using a naked chart will allow you to trade without indicators pulling focus – it will enable you to master the language of the market and analyse things like currency pairs without reliance on indicators, making you a more robust and more consistent trader in the long run.
#2 The 1-Hour Chart
Another process we use to help us analyse currency pairs is sticking to a single timeframe, in our case the 1-hour chart.
Analysing currency pairs is all about the simultaneous buying and selling of currencies. When using a multi-time frame, you can receive conflicting information: one says buy, and another says sell. When it comes to trading for beginners, this can be incredibly confusing as you don’t know which trade to take.
Using one single time frame eliminates this issue because you only have one bias in the market, making it much easier to know whether you want to get in or out of the market.
As a trading beginner, it’s easy to get bogged down with how much information there is and how many trading strategies are claiming to be the best. At Guerrilla Trading, we strip things back, whether that’s by only using one time frame or by removing indicators and ensuring we fully understand the market ourselves.