As a forex trader, one of the most important aspects of your analysis is identifying the point of control (POC) on a daily chart. The POC is the price level where the most trading activity occurred during a specific time period, and it is a crucial indicator of market sentiment and direction. In this article, we will discuss how to find the daily POC on a forex chart, step by step.
Step 1: Choose a Currency Pair and Time Frame
The first step in finding the daily POC on a forex chart is to choose a currency pair and a time frame. The most popular currency pairs include EUR/USD, USD/JPY, GBP/USD, and USD/CHF. For this example, we will use EUR/USD and a daily time frame.
Step 2: Open a Forex Chart
After selecting the currency pair and time frame, the next step is to open a forex chart. Most trading platforms offer a wide range of chart types, including candlestick, bar, and line charts. For this example, we will use a candlestick chart.
Step 3: Identify the Highs and Lows
Once you have opened the forex chart, the next step is to identify the highs and lows of the price action. The high is the highest price reached during the trading day, while the low is the lowest price reached. You can use the wicks or shadows of the candlesticks to identify the highs and lows.
Step 4: Calculate the Volume
The next step in finding the daily POC is to calculate the volume of each price level. Volume is the total number of trades executed at a specific price level during the trading day. You can use a trading platform that offers volume indicators, such as the MetaTrader 4 (MT4) platform.
Step 5: Plot the Volume at Each Price Level
After calculating the volume, the next step is to plot the volume at each price level. You can use a horizontal histogram to represent the volume at each price level. The histogram should be plotted on the right-hand side of the chart.
Step 6: Identify the Price Level with the Highest Volume
Once you have plotted the volume at each price level, the next step is to identify the price level with the highest volume. This price level is the POC. You can easily identify the POC by looking at the histogram and finding the highest bar.
Step 7: Analyze the POC
After identifying the POC, the next step is to analyze it. The POC represents the price level where the most trading activity occurred during the trading day. It is a crucial indicator of market sentiment and direction. If the POC is located above the current price, it indicates that the market is bullish, while if it is located below the current price, it indicates that the market is bearish.
Conclusion
In conclusion, finding the daily POC on a forex chart is a crucial aspect of your analysis as a forex trader. It helps you identify the price level where the most trading activity occurred during the trading day, which is a crucial indicator of market sentiment and direction. By following the steps outlined in this article, you can easily find the daily POC on a forex chart and use it to make informed trading decisions.
