If you are a technical trader you want reliable chart formations that give you high odds trading opportunities.

Here we will look at a set up that can give you trades with low risk and high reward.

Time Frames

Currency markets trend long term and the good trends last many months weeks or years and this should be the basis of your forex strategy.

This formation will show you how to not only trade reactions within the trend but also catch breakouts.

The Ultimate Chart

For looking at long term trends is the weekly chart as it gives you the big picture that you simply cant see on the shorter daily chart.

Keep in mind that currency trends tend to reflect the economic health and confidence in the underlying economy of the country and these trends last a long time.

Forget day trading data.

The time period is to short and data unreliable.

That's why day traders never make money longer term. Ever seen a day trader with a long term track record of real profits?

Neither have I.

Ok, lets continue.

Get out the weekly chart and look for important support and resistance.

Now lets look at a set up.

Were going to look at the US v Canadian Dollar.

Go to a free chart service such as futuresource.com

The weekly chart shows you the trend is down longer term in US Dollar but the there is a good short term rally unfolding.

Resistance starts around the 11900 level

Now pull up the daily chart and it shows the short term trend is bullish in the US dollar but check resistance just below 11900.

If you look at both charts together you will see that this looks like a correction of the US dollar in a longer term bear market.

If prices hurdle the 11900 level all short bets are off.

At present it looks a great area to try and go short US dollar into resistance.

This resistance is key.

Now pull up a momentum indicator the stochastic.

This indicates short term momentum is up.

If momentum fails i.e the stochastic lines cross with bearish divergence to the downside below resistance odds favour the long term bear trend in the Dollar resuming.

So you have strong resistance lining up on daily and weekly charts that looks set to be tested.

Get confirmation before acting

Don't jump early into short dollar positions wait for the stochastic to give the signal and if it does odds favour the bears.

Many traders fail in trading as they don't like to wait, they like to anticipate.

That's not a smart way to trade.

Adding a new dimension to your trading

From this method you get the big picture on the weekly chart that adds the longer term trend into the equation and then you time on the daily.

This is a great way to enter existing trends and look for new breakouts.

If you use the stochastic momentum to time entry you can spot some great trading opportunities.