Learning to handle trading charts is definitely not optional for the modern Forex trader. There is no way around Forex markets without analysis and strategies, all of which rest on – you guessed it, Forex trading charts. Forex charts analysis involves searching various currency exchange chart types for Forex chart patterns that will help traders predict future price action. Therefore, in this article we will discuss the rules of the currency exchange chart.
Not only do traders need to be able to perform accurate Forex chart analysis, but they also need to know how and where to procure the latest and most accurate live Forex charts. It does not really matter which type of foreign exchange rate chart they prefer. As long as they are accurate, the only major difference is in the presentation on the exchange rate chart.
Forex Trading Charts Types
We will now discuss the different types of Forex trading charts. First, we should say that there are three major foreign exchange charts used in trading. These are the Line currency chart, the Bar currency chart, and the Japanese Candlestick currency chart.
Line Currency Chart
For instance, a Line currency chart features all of the closing prices connected in a line so that you can follow the general direction of the price action.
This is how the Line Forex chart looks like:
Above you see the Line USD currency chart versus the Euro (EUR/USD). As you see, the Line currency exchange chart is pretty basic, and the information it gives is not that much. This is why the Line trading chart is not widely used among the Forex traders.
Bar Currency Chart
The Bar Forex chart will compress all the relevant information in a bar, with some hashes on the side, and each one will be a story for itself. Whether they are hollow or filled, long or short, and where their hashes are – all of these things can tell you something, provided you know where to look.
This is absolutely the same time frame as the previous image. However, this time we use Bars for our exchange rate chart instead of Line.
Generally, each bar on a Bar trading chart represents the size of the price move during the respective period.
This is an example of a single bar, which is bullish. There are couple dashes on each side of the bar. The left dash of the bar is the opening price of the period. The right dash is the closing price of the period.
Since the bar is bullish, it is green, and the opening price is below the closing price. If the bar was bearish, it was going to be red, where the opening price is above the closing price.
Japanese Candlestick Currency Chart
Finally, the most widely used type of trading charts is the well known Japanese Candlestick currency exchange rate chart. These will provide all the relevant data, only in a form that resembles a candlestick rather than a bar – hence their name. One look at a candlestick trading chart and a trader will be able to read the general direction of a trendline Forex indicator, provided there is one.
Notice that the Japanese Candlestick Forex chart is pretty much the same as the Bar currency exchange chart. The reason for this is that it visualizes absolutely the same information – Open, Close, High and Low during the respective period.
We approach a bullish Japanese Candlestick. Same as the bar, the candle is green, and the opening price is below the closing price. If the candle was bearish, it was going to be red, and the opening price was going to be above the closing price.
How Can I Find Foreign Exchange Carts
The most detailed foreign exchange charts are located inside the innovative Forex trading platforms. These platform could be reached either in the net, or by downloading an external software. After getting access to a trading platform like MetaTrader 4 for example, you will be able to implement detailed currency rate chart analysis, as well as different kind of trade automation.
Currency Exchange Chart Essentials
Modern foreign exchange charts are very appealing, albeit some of them are more popular than the others. Historical currency charts can be found online, and there is never a shortage of reliable sources. They are more than just a visual aid for traders. In combination with market indicators and Forex software, they can be put to lucrative effect. Just remember, these things are only as good as the trader interpreting them. There is no way to predict the future, and the only way to make an educated guess is with the help of live foreign exchange charts, at least when trading currencies.
Having said that, plenty of traders got burned over the years, and this created a lot of unnecessary tension, not to mention distrust. After all, getting an accurate exchange rate chart analysis and putting it to good use is nothing short of a form of art. But do not despair! Most brokers offer various reports and articles from analysts and experts, plus various educational materials, so learning a few useful strategies in combination with some solid trading charts know-how can and will get some real results.
Experience with Currency Exchange Charts
However, in order get results, you need to learn the basics of the trading charts available, including how to find, open and read them – and that is only the beginning. Next are various charting packages, tools, and accessories, some of which could prove disastrous if not handled with care. This is where the plot thickens.
The truth is there is no consensus on how a currency exchange rate chart should be interpreted, just like there is no consensus on a single, perfect Forex strategy. It all depends on a trader’s personal preferences, goals, and the overall trading style.
In fact, you could make an argument that there are as many ways of interpreting and using trading charts as there are Forex traders, as each of them has his or her own way of doing business, at least after they have learned the ropes.
Some prefer to base their trades on the feeling in their gut, although this is not recommendable to anyone whose instincts do not border on supernatural abilities. Statistically, most rookies go about with what little knowledge they possess on currencies and use trading charts only to gauge the general price direction. By the way, did we mention that these guys are probably behind the majority of complaints on Forex brokers and trading in general? Yes, because soon or later these newbie traders end up broke for not understanding the currency exchange rate chart.
A notch above is news traders, who base their major moves on large events and their outcomes, using foreign exchange charts mostly to confirm their suspicions. They rest their faith on various reports and trusted news outlets, although they seem to be forgetting one important fact. A lot of people also like to watch the news, and any information they learn had likely passed through several hands long before it was released. And even if they score an “exclusive,” chances are this outcome has already been factored in by the true masters of this game.
Hardcore professionals do not base their trades on hunches and rumors, but merely factor them into their own equations. This is where the currency exchange chart would really earn its keep, as the potency of its mixture with trading signals comes to light. True masters of this game do not use trading charts to predict trends. Rather, they try to predict actions of their competitors, instead – a far more lucrative and direct approach.
Being able to predict how the people will react to a certain development is far easier, not to mention more reliable than trying to predict said outcome. This approach is by far the hardest, but the rewards it offers cannot be ignored. All things being said, your foreign exchange rate chart has its purpose and that has been the entire point all along.
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