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Understanding the Fundamentals of Forex Charts

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For new traders, forex charts could be very daunting. But the truth is, these are much easier to understand than what you initially think. When you have fully immersed yourself in trading, reading these charts and contributing to them will easily become like second nature that you could do even with your eyes closed.

First of all, it is a must to note how trading trends tend to change. Whether they are low or high can be affected by a plethora of external changes such as economic growth, interest rates, political risk and employment rates. What happens around you will have a direct impact on your trading activity.

When viewing a forex chart, you will want to open your software and choose a currency pair. After picking this, you will then need to determine the period interval at which this will update such as once a day. Also, you need to specific the range of data. For instance, you may want to view the data which spans over one year.

After entering the currency pair, data range and time period, you will then be facing a chart which could be hard to read at first.

The candlestick chart is the default model being used in all marketplaces so it might be a good place for you to start. These are almost the same to bar graphs you have probably studied in school and are not much different in practice. If you will observe, the shapes on the page resemble candles and they could different in colors with extra data which surround them.

Candle charts are often used in trading to show the low, high, close and open prices, demonstrating the data which correspond to your chosen currency pair for a specific time period. Simply put, the candle’s body shows the close and open prices while the candle wicks show the low and high prices.

Depending on your software, when the closing price is higher compared to the opening price of the earlier candle, the candlestick will take on a blue color. When it is vice versa, the candlestick’s color is read. It will let you see of the trading period ended down or up, letting you make better educated trading decisions.

This may show other indicators for demonstrating other patterns. The experienced traders always use the technical indicators for helping them make good decisions. With the use of this tool, you can easily locate specific price trends and predict any future activity. The indicators can be downloaded online and are easy to add with the use of your software.

Also a famous model shows a trend line instead of a shape. These are pretty much self-explanatory but are proven to be very informative for traders to observe.

Trend line reveals that prices are always going t trend in one out of three ways, either sideways, up or down. Prices trending up are usually called bull markets while those trending down are bear markets. The ones going sideways are range bound market. Being familiar with this inside lingo can help you get a better understanding of the forex market and use it to your advantage.