For the newbie trader Forex trading often appears as an esoteric subject. With all the psychedelic colors that appear on the trading screens you would easily start wondering if forex trading can indeed be done by ordinary people. That could well be the case when you open out forex charts as an adjunct to your trading screen, especially as it has a lot to do forex lines and colors. Before we start looking at charts, one has to understand the concepts of fundamental analysis and technical analysis. Both these concepts are used to analyze currency markets and forecast the direction of future currency trading movements. Fundamental analysis deals with economic, social, and political forces that drive supply and demand of currencies and how price movements take shape on account of the same. On the contrary, technical analysis means studying currency price movements by itself in order to make a prognosis of future currency price trends. Forex investors can use both types of analysis to make trading decisions. But the surmises based on technical analysis is what makes you open or close deals, its all the more important to be able to read charts. In short charts as mentioned earlier are an important tool in technical analysis. You can call it a visualized representation of forex price movements, as a result of activity that goes on between buyers and sellers in the currency market. Forex charts tell a clear picture of whether a pair of currencies is getting stronger or weaker so that you can make your trade likewise. Therefore it is an indispensable tool for any currency trader. So coming back again to the three different types of charts, you can classify them as: A currency line chart is a line that connects different closing prices. These connected prices understanding the price trend of a particular currency over a specific time frame. As it simply connects the closing price with a line, just glance at the line chart and you get a feel of the market. Below is an example of a line chart. Take note that a line chart clearly and simply shows the direction of the trend. The base of the chart gives the timeline. The right-hand side of the chart charts the currency values that generally run from a little below to a little above the lowest and highest prices reached during the time period specified. Before you read the chart first select the time frame for the chart as for example a short time scale can help you discern minor trends while a long time scale can help you to see long term trends. For example if you are trading through a broker such as fxcm look at their charts to trade and so on. In other words line charts only charts the overall direction of long-term trends by measuring closing price for a series of periodsand hence are of limited use. A bar chart gives a bit more information than a line chart in that it gives you the open, close, high, and low of the market for a particular currency pair. In effect it gives you more data about the price changes that happen during the bar, not just at one point in time. In OHLC the individual letters denotes Open, High, Low and Close for that particular currency pai. The horizontal line on the left stands for the opening price of the currency. The top point of the vertical line shows the highest price of the currency during that time period. The bottom point of the vertical line shows the lowest trading of the currency during that time period. The horizontal line on the right shows the closing price of the currency. Essentially a bar chart conveys four key pieces forex information for any given time frame. They are the opening price during forex time frame; the closing price; the high price; and the low price. As bar charts can be used for all time frames, it could charts price activity, say over the past minute, hour, day or over the past month. Looking at the chart for example you can figure out when exactly the markets moved quickly. Read bar charts from the left side to the right side. The bottom of this vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest traded price. The horizontal tick on the left side of the bar is the opening price, and the right-side horizontal tick is the closing price for that time period. In effect they offer more data about the price changes that happen during the trading, not just one point in time as trading line charts. Candlestick charts were invented by the Japanese in the s to study the movements in the price of rice on Japanese commodity exchanges. Candlestick charts show the same information as understanding bar chart but in a graphically attractive way. Candlestick bars indicate the high-to-low range with a vertical line as in any bar chart. But in candlestick charts, the larger block in the middle indicates the currency price range between the opening and closing prices. Real bodies can be either long or. The center of the bar on the left side is green in color and the center of the bar on the right side is red in color. Shadows can be long or short. If the upper shadow on a green candlestick is short it indicates that the close was near the high. This means that if the price closed higher than it opened, the candlestick would be green. If the price closed lower than it opened, the candlestick would be red. For example, if the upper shadow of the red candlestick is short it indicates that the open that day was closer to the high of the day. In the final analysis candlestick charts serve as a visual aid, and charts information you get from them is no different from what you would get from an OHLC bar chart. How to Read Chart. To add comments, please log in or register. Both these concepts are used to analyze currency markets and forecast the direction of future currency price movements Fundamental Analysis and Technical Analysis Fundamental analysis deals with economic, social, and political forces that drive supply and demand of currencies and how price movements take shape on account of the same. What is a currency chart? Line trading A currency line chart is a line that connects different closing prices. Bar chart Understanding bar understanding gives a bit more information than a line chart in that it gives you the open, close, high, and low of the market for a particular currency pair. In OHLC the individual letters denotes Open, High, Low and Charts for that particular currency pai Have a look at this example of a price bar: The horizontal line on the left stands for the opening price of the currency HIGH: The top point of the vertical line shows the highest price of the currency during that time period LOW: The bottom point of the vertical line shows the lowest price of the currency during that time period CLOSE: The horizontal tick on the left side of the forex is the opening price, and the right-side horizontal tick is the closing price for that time period In understanding they offer more data about the price changes that happen during the bar, not just one point in time as in line charts. Candlestick chart Candlestick charts were invented by the Japanese in the s to study the movements in the price of rice on Japanese commodity exchanges. Now consider this candlestick bar that is all colored up. Real bodies can be either long or The center of the bar on the left side is green in color and the center of the bar on the right side is red in color. For example, if the upper shadow of the red candlestick is short it indicates that the open that day was closer to the high of the day In the final analysis candlestick charts serve as a visual aid, and the information you get from them is no different from what you would get from an OHLC bar chart.
Forex Analysis. Predicting Market Movements with Lines, EUR/USD
Forex Analysis. Predicting Market Movements with Lines, EUR/USD
2 thoughts on “Understanding forex trading charts”
Foldout worktables, when extended, fit flush with the sidewall rails to increase effective surface area.
Seed financing is generally associated with which one of the following life cycle stages.