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Forex charts

Now before we get down to the nitty gritty of choosing our $orex tradingo account, lets talk about forex charts for a moment, and their relevance and importance – after all a chart is just a chart isn’t it – not in my world I’m afraid!

Imagine for a moment that you had never flown in an aeroplane before, and after getting above the clouds, the person in the seat next to you turns to you and says – ‘can you tell me what speed we are flying at now’? You look out of the window, but as far as you can see, you are hardly travelling forwards at all, and indeed at times it is almost as if you are standing still. You have no idea what the speed is, you have nothing to provide a reference for your analysis. At take off, you could probably hazard a guess, simply by measuring the time to travel between two points on the ground – this might be an approximation, but at least you have some idea of the speed. Above the clouds, you have no frame of reference, no check points, and nothing to measure against. I’m sure you can see where I’m coming from here!

Trading with the free forex charts on your trading platform is much the same as in the above analogy. Suppose your broker is quoting a price of 1.2550 – 1.2552 on your eur usd spread, on your online forex chart, and I was trading with you, and asked you a simiiar question, as in my flying analogy above. I might ask you the following questions :

  • 1. What is the current price in the interbank market?
  • 2. What is the current spread in the interbank market?

Most forex traders will be unable to answer either of these questions, were I to ask, and as you are reading this, you may not be able to either, next time you trade. Why? Simply because you have no other point of reference. Whatever the type of broker you choose, without a reference point, or in this case an alternative data feed or set of charts, then you have no idea whether your broker is quoting you forex real time rates and spreads, which match the interbank market, wildly distorted rates which bear no relationship to the interbank market, or somewhere in between. In addition, when markets are volatile, do you have any way of knowing whether the spikes on your charts are real or false, whether the slippage in quotes is real or false, and whether the latest freeze on your trading system is real or false. The short answer is no, as you have no way to reference the charts you are using, day in and day out. The answer of course is to get a separate data feed from a reputable supplier, and preferably one that only supplies chart feeds and not forex trading platforms, therefore remaining independent from the market and only interested in providing reliable real time price feeds.

Every forex trader, whether large or small, should take time to compare various data feeds, and to have at least two and preferably three on the desktop at any one time, and if you follow my advice you will be shocked at the different quotes you will see, with feeds varying by up to 10 pips at certain times. Worse still, you will also see price spikes on your ‘free’ trading platform which do not appear in the interbank market, clearly evidencing the manipulation of the market data in your forex charts by your market maker broker. Watching several sets of forex charts simultaneously, is the easiest way to check out your $orex brokerd to catch them playing all the tricks on their clients, including spikes which trigger stop losses, slippage from the realtime market, widening spreads at odd moments and frozen price screens when markets are volatile.

Just like your forex trading account, you have no doubt be sold on the ‘advantages’ of free forex charts – advantages to whom – certainly not you, that’s for sure. If you want to be successful as a forex trader then use a separate data feed and charting package – do not use those provided by your broker, particularly if you are trading with a market maker. Why not just give the broker your money, it would be easier, quicker and less painful. Take my advice and if you can’t find a reliable free service which is separate from your broker, then spend some money and subscribe to a dedicated charting package, and check where the supplier gets the feeds from, and also who contributes to the liquidity pool. The greater the number of central banks, then the more liquid the quotes and the tighter the spreads will be, and the closer to the interbank market your spreads will be as a result. Finally, if you are trading in exotic pairs, this is even more vital, and also ensure that the dedicated charting package feed includes banks who trade in that part of the world, so that liquidity remains high at all times.

And you thought a free forex chart was fine for your trading! If it’s free, there is a reason, and it will not be for your benefit either, so stop trading now, and start checking your brokers quotes – you will probably be shocked.