Forex charts are graphical and visual interpretations of the movement of currencies, through a certain period of time. Typically, the prices are plotted in the X (horizontal) axis, and the time frame is presented on the Y (vertical) axis.
In today’s modern age, Internet technology has been integrated into the foreign exchange market’s trading system, coordinating and relaying information. One tool born from the Forex market’s online venture are the live Forex charts.
The FOREX market is an over the counter currency market for trading currencies from around the world. It is an extremely liquid global market operating nearly seven days a week. There are two approaches to research when trading on the FOREX market, Fundamental Analysis which attempts to predict market movement through the use of economic theory and Technical Analysis which looks for market buy and sell signals by studying past price activity and market behavior.
This article will discuss one aspect of Technical Analysis, Understanding Forex Charts. Charts are the primary tool used by Technical Analysts to recognize price movement and repeating patterns.
Three types of charts are used for analysis.
CHART TYPES
Line Chart – presents a representation of past prices over varying time periods. The closing price at the end of the day is used to construct a line chart.
Bar Chart – A bar chart depicts a currency’s opening, closing, high and low price (OCHL) over a set period of time (usually 30minutes).
Candlestick Chart – The candlestick chart represents OCHL prices by using a solid mark when a currency opens higher than its close and a hollow mark when it closes higher than the opening rate.
An analyst looks for support and resistance levels which are underlying clues in a chart. A currency is said to have a level of support at which it will trade higher and find difficulty trading below. Alternately, It may have a level of resistance at which it will tend to be unable to rise above. When the market does manage to cross a support or resistance level, it is presumed to continue in that direction for a period of time.
There are many questions in the world that are difficult to answer. Such as who is the best actor in Hollywood.
It is dependent upon who is being asked the question. Well, this is the problem with Forex chart patterns as well.
This depends largely on who is making the actual trade – no two forex charts are the same! (more…)
When you are performing Forex trading you should know that while all the forex charts show the same price information, they all have different ways of displaying it.
Line charts, bar charts and candlestick charts are the most widely recognized charts that Forex traders are familiar with for real-time analysis.
It is important to understand these three types of basic charts in order to begin to be successful as a Forex trader over the long run. (more…)
