{"id":118306,"date":"2017-12-26T10:15:17","date_gmt":"2017-12-26T15:15:17","guid":{"rendered":"http:\/\/countingpips.com\/?p=118306"},"modified":"2018-06-01T15:46:51","modified_gmt":"2018-06-01T15:46:51","slug":"how-to-compare-charts-and-find-better-setups-in-3-steps","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/12\/how-to-compare-charts-and-find-better-setups-in-3-steps\/","title":{"rendered":"How to Compare Charts and Find Better Setups in 3 Steps"},"content":{"rendered":"
December 26, 2017<\/div>
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By Admiral Markets<\/b><\/p>\n

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\nSource: Shutterstock<\/em><\/p>\n

Dear traders,<\/p>\n

Many traders have their own favourite currency pair, CFD, or commodity. In those cases, traders tend to know the instrument better than others as they closely follow that financial asset.<\/p>\n

There is, however, also an advantage of analysing the markets from a wider perspective and comparing multiple currencies, CFDs, or commodities with each other to see which one is relatively better.<\/p>\n

This article explains how traders can make this comparison in a step-by-step guide. It also shows the benefit of finding a pair or instrument with most potential.<\/p>

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\"Free<\/a><\/p>\n

Step 1: Analyse Market Structure and Multiple Time Frames<\/h2>\n

The best method for understanding the chart is by analysing the
\nmarket structure<\/a>. This means interpreting the charts by using these three pillars:<\/p>\n

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  1. Trend and price momentum (flow)<\/li>\n
  2. Finding support and resistance levels<\/li>\n
  3. Spotting price patterns<\/li>\n<\/ol>\n

    Let’s take the Forex market as an example. My starting point is often one of the major currency pairs, e.g., the EUR\/USD.<\/p>\n

    I will analyse the EUR\/USD on multiple time frames using the three pillars of the market structure to understand whether this currency pair offers interesting trade setups. For instance, most recently, I was indicating in my
    \n    wave analysis<\/a> to expect five bullish waves up and three bearish waves down.<\/p>\n

    <\/a><\/em>
    \n<\/em>Source: EUR\/USD 4-hour chart from 1 November 2017 to 14 December 2017<\/em><\/p>\n

    Step 2: Review Other Similar Pairs and Instruments<\/h2>\n

    The next step is to analyse a new pair or instrument that is similar or connected to the first one. With the Forex market, it would be the same currency. For instance, focus on the US Dollar and analyse the GBP\/USD after analysing the EUR\/USD. With CFDs, it could be an instrument that is from the same asset group like the CFD of another technology company.<\/p>\n

    When analysing the second asset, I will again use the same approach by analysing the market structure on multiple time frames. There is one markable difference however: this time around I compare the instrument with the first chart. Let me explain this process with an example.<\/p>\n

    Whereas step 1 was focussed on analysing the EUR\/USD, in step 2, I would review a similar pair such as the EUR\/AUD, for instance (or the GBP\/USD), and compare both charts to each other. For example, my analysis indicates that the EUR\/USD is in an uptrend, but does the EUR\/AUD show a similar structure in terms of trend, support & resistance, and patterns?<\/p>\n

    These are the two potential answers:<\/p>\n

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    1. Yes, this could be a first clue that the Euro currency is showing similar movements against both the USD and AUD. In this case, analysing more Euro currencies provides more information about the position, strength, weakness, and patterns of the Euro itself.<\/li>\n
    2. No, this could indicate potential indecisiveness for the Euro. In this case, analysing other non-Euro currency pairs makes more sense to find a currency that is relatively strong and weak.<\/li>\n<\/ol>\n