How to Read Forex Trading Charts
Rancakmedia.com – Many beginners don't know how to read forex trading charts properly. Actually, stock charts show the historical changes in stock prices over a period of time. There are many shapes such as line (line diagram), bar (bar diagram) and candle (candlestick chart).
This chart is one of the most powerful analytical tools for stock investors and traders, as it allows us to recognize the existing state of the market and predict future stock price movements.
When reading stock charts we must be careful not only about the direction of price movement. Evaluation of the actual price movement direction should be excluded until the second or third stage.
Time period is the number one factor to take into account when reading stock charts. Then we look at the direction of the price trend and many other factors. Interested in further exploration? Let's read the review in full.
As a forex trader, it is very important that you know how to read charts. You have to be able to read price charts effectively if you want to learn technical analysis well.
Having a chart makes reading price fluctuations over time much easier for you as a forex trader.
Charts allow you to identify trends and spot price patterns which then emerge to provide profitable trades.
If a trader does not know how to read charts effectively, it is impossible to execute business strategies that require the ability to read charts. In reality, forex charts are basically displays showing the movement of market values.
So before you know how to read the right chart, you have to know the 3 types of charts that are used in forex trading to help with the analysis work!
3 Kinds Used In Forex Trading
1. Line Charts
The trading platform line chart is one of the simplest charts. This chart is often used by traders and technical analysts because the full data can be displayed. The Line Chart is displayed as a line connecting the closing prices.
Trades, for example, have closed at a certain level in recent days. Each of these closing price levels is connected in a straight line and here at any given time you can easily observe the overall price trend.
For example, a trade is closed at a price on a number of consecutive days of 100, 200, 150, 250, and more. These prices are connected in a straight line so you can observe the overall price movement over a certain time frame on this chart.
2. Bar Charts
Bar charts are one of the most favorite charts of American traders. Why is it? As such, bar charts are easier to work with than other charts because the units of bars are simpler.
Although somewhat more complex than line charts, they offer information over a period of time about the opening, closing, high and low prices. Because this information is available, these charts are often referred to as OHLC (Open-High-Low-Close) charts.
- Low is the lowest price that has been traded in a given time frame.
- High is the highest price during a certain period of time.
- The close on the small horizontal line on the right is the closing price.
The vertical line on this chart shows the price range during that period. The starting price in the image above is lower than the final price. But the initial price may at one point be greater than the closing price.
3. Candlestick Charts
What are candlesticks? Candlesticks are a kind of price chart that technically read price changes in financial markets. Named Candlestick because of its shape like a candle. The chart originates from the country of Sakura and is also known as the Japanese Candlestick Chart.
You must have information on the initial price (Open), highest price (High), lowest price (Low) and closing price (Close) or better known as OHLC within a certain period of time when you create a candlestick chart.
These charts offer information that is not too dissimilar to bar charts. There is only a difference in "posture" between these two charts. In a given period, the body represents the gap between the opening and closing prices. The body of this candlestick chart is usually black and white.
If the body on the chart is white, the price is at the bottom of the chart, otherwise the price is above if the body is black. If the initial price is below the closing price, this is generally referred to as a bull candle. The words bullish or bullish are used in technical analysis when market prices tend to increase.
The word bearish or bearish is used to indicate a decrease in price movement, so a candlestick with a price above the price is called a bear candle. You can use color combinations to make this chart more attractive and know the difference between a bull candle and a bear candle.
Many traders like to use these charts because the open, close, high and low prices can be identified more visually than a bar chart. Besides that, candlesticks included in one of the most frequently used charts by technical analysts due to its easily identifiable data presentation abilities.
Important Things to Know How to Read Forex Trading Charts
Then, what are the important things for reading forex charts correctly?
1. Observing Price Movement Patterns
You have to adjust the price movement pattern to the type of transaction you are doing. If you want to buy, concentrate on the currency pairs whose charts are growing. If you want to sell, look for a currency whose chart is showing a decline.
2. Check the Selected Time Period And Be Careful With The Distribution
You don't have to worry when you observe a good price move. Check carefully the chart you choose, as there are certain features to adapt to your trading strategy in each time frame.
Make sure that the chart presentation is at the same time as your analysis. You can also focus on 1 entry time period so that the trading process can be more concentrated. You also need to take into account the difference between the selling price and the buying price to be able to interpret the chart accurately and precisely.
Ready to master these three charts accurately and correctly? Don't worry if you still can't read the chart. Using a test account, you can learn how to read excellent charts.
By using the chart as a tool for technical analysis, you can identify trends and find price patterns that may work in your favor.
Many beginners don't know how to read stock charts properly. Charts allow you to identify trends and spot price patterns which then emerge to give you an advantage in trading.
You have to be able to read price charts effectively if you want to learn technical analysis well. Having a chart makes reading price fluctuations over time easier for you as a forex trader.