Reading a chart: a beginner's guide to patterns and indicators
Majed ·
Three patterns and two indicators are enough to start. Here is how I use them.
Most beginners open a chart, add ten indicators and then cannot decide anything. You need far less than that to start.
Begin with the trend. On a daily chart, draw a line under the last three rising lows, or over the last three falling highs. If you cannot draw either, the market is moving sideways, and that is useful to know too.
Next, learn three patterns: the range, where price bounces between two levels; the breakout, where it closes clearly beyond one of them; and the double top or bottom, where it fails twice at the same level. These cover most of what you will see on gold or a major currency pair.
Add two indicators at most. A 50-day moving average tells you the direction at a glance. The RSI shows when a move is stretched, but it is a warning, not a signal to trade against the trend.
Finally, write down what you see before you trade. If you cannot explain your entry in one sentence, wait for a clearer chart.