How to read forex trading charts

A forex chart shows you the exchange rate between two currencies and how it has changed over time. If youre just getting into forex trading, learning to use these charts will help you understand the markets. Charts are the main tools for technical analysis. Charts are using to plot a sequence of prices and price movements of an asset on certain of duration.

It is just a graphical way of showing how the stock prices have performed. Chart has an x-axis called horizontal axis and a y-axis called vertical axis. Generally y-axis represents the price and the x-axis represents the time. A chart always represents the history of the volume of trading in an asset.

Types of Charts

Forex charts come in different forms, but the three most popular types of chart are line charts, bar charts and candlestick charts. Heres what you need to know about each of them. Also In chart, asset price comes such as stock, currency pair, commodity like so on in many varieties. It helps to understand in a quick way for individual traders or investors to choose one type over another. Charts are used for the following purpose:

• Comfort and Familiarity

• User-friendly and quickly identified

• Underlying purpose

Let's discuss the three different types of charts.

Tick Charts

Tick charts have a data point which drawn every time while the market moves or ticks. It means there is no certain time axis to a tick chart; it is just a short term trader just focus on the price action. In the tick chart you will see red line and blue line, red line shows the offer side similarly a blue line indicates the bid side of the market.

Suppose, when you want to take a look at a tick chart on MT 4, and MT 5, you could do double-click on the relevant currency pair in the Market Watch window to see details.

Point and Figure Charts

This is one of the best popular charts in forex trading that has allows:

• to filter exchange rate moves,

• identify clear support and

• Resistance levels as well as trade specific patterns.

This chart allows traders to focus purely on the exchange rate action. Moreover, point and figure charts are typically constructed on graph paper by using an X axis to fill a rising column of boxes and an O to fill a falling column of boxes. Every box represents a specified value that the exchange rate has to attain to justify marking an X or an O on the graph.

Line Charts

The line chart is the most basic of all chart types. It simply connects the closing prices of periods with a line, and doesnt take into account the opening, high, or low price as bar or candlestick charts do. These types of charts mostly used in closing prices and they also could be drawn through high as well as low prices or opening prices instead. A line chart has an x-axis with fixed time intervals.

Bar Charts

A bar chart more resembles a candlestick chart, with the main difference being that a bar chart has no solid body like a candlestick. It shows the opening, high, low, and closing price of a period. The high and the low lines are connected with a vertical line with a small horizontal dash is shown at the open level protruding to the left. The closing level is shown by a horizontal dash to the left side. However bar charts have fixed intervals on the x- axis.

It is useful for identifying exchange rate gaps with the range of the first time period does not overlap that of the upcoming period.

Candlestick Charts

Candlestick charts invented by Japanese that offers more information than a bar chart because the color of the candles body signifies when the market increase or decrease in a particular time period.

Take an example, suppose a white body can be used to show a rising or bullish candle whereas a black body can be used to show a falling or bearish candle. The vertical lines are goes between the low and the open and between the close and the high are called “wicks”. Apart from that, some candles have long wicks and others have short wicks and this could be better half when we predicting subsequent behavior in the forex market. Candlesticks charts have predictive value and may be considered chart patterns in their own right so that many of them have colorful names like doji, hanging man, the hammer as well as shooting star.

What is the chart pattern to use when trading？

Chart patterns are important tool for traders that are utilized as part of traders technical analysis. Chart patterns play an integral part while you are looking for market trends and predicting movements for all like new comers as well as professionals. Traders are analyzed markets such as forex, shares, commodities and more.