Getting The Most From Reading Your Currency Exchange Chart

Reading any chart or analyzing any type of data depends on what your connection is to that data. Here are some examples. If a bill is put before congress and they pass it 70% for the bill versus 30% against, it sounds like a landslide. However if the senate declares before the congressional vote that they will only ratify it if the congress vote receives an 80% to 20% victory margin then the bill is in big trouble. On the other hand in a presidential election if the candidate receives a mere 55% of the vote they declare that a landslide victory.

Let's look at the real-estate market. If you bought a house for $400,000 and sold it for $700,000 2 years later you made a really nice return. Let's say at the same time your neighbor bought his identically valued house for $400,000 and when you sold your home he kept his identically valued $700,000 house. 2 years later his house is now worth $1,000,000 and you are kicking yourself. 2 years after that the big boom hits and the value of the house has decreased back down to under $500,000. He had his chance to make more but he was not able to capitalize on it. You took your money off the table as the house chart was moving up in your favor. In our example, if he sells now he will be doing it while the market is moving lower.
If I am in a trading room and I and a colleague each buy something at $1 and I sell it at $3 I made a nice profit. If in the meantime the investment goes to $5 and he has kept it and starts yelling 'see you sold incorrectly while I still have it'. If he tries too hard to milk that little extra from his chart and then the bubble bursts and 15 minutes later it goes from $5 back to $1 then what good was it all for him? You are not looking to buy at 10 and sell at 100 you are looking to buy at 25 just as the train has left the station and sell at 75 right before the train reaches its next stop at 100. You want to take a nice smooth ride. I myself have always liked the pigeons taking a boat ferry ride example the best. The pigeons who obviously know how to fly want to take a rest crossing the river. So the pigeon will land onto the boat a few seconds after it departs in the correct direction and fly away off the boat just before it bumps into its docking point. The pigeon thereby avoids the bumpy start and finish to its ride while cruising on the high sea for 75% of the ride on the current trend.

When you read your currency chart you have to know where your investment strategy is before you begin. If for example you are a long term investor then long term small retracements on the profit side is a much more acceptable thing then if you are trading for the short term where a retracement can turn a profit into a loss. Once again you must manage the risk and know how much profit versus loss versus trading retracement you are looking for in your investment.

Remember 2 things especially. The trend is your friend for opening long or short positions and #2 while you do not want to get out of your position too early don't kick yourself every time a currency position continues to go your way after you have already liquidated. It is supposed to continue on its ferry way for just a little longer. As my friend's Dad taught me long ago "you can't lose money taking profits". For more information on reading your currency charts check out www.howtodothings.com/finance-real-estate/how-to-read-a-currency-chart