Using Forex trading charts to analyse market movements and determine inception and exit points for currency trades
Forex trading charts provide a trader with information on currency price trends, indicators, deals made and other pertinent data that could help him make the right trading decisions. These charts can be found online for free or a trader can purchase software that will generate data significant to the foreign exchange market.
Some of the most popular Forex trading charts used by online brokers and traders are line charts, candlestick charts and bar charts. A line chart is comprised of a single line tracing the path from one closing price to the next one. The line shows the price movement of a pair of currency over a given period of time.
A candlestick chart, on the other hand, is more graphical in nature and more sophisticated than a line chart. In candlesticks, the middle block represents the difference between the opening and closing price. Most of the time, the middle block is colored to show that the currency closed at a lower price than when it opened.
Bar charts in foreign exchange trade represent opening and closing prices at the same time. The bottom of the vertical bar in this chart represents the lowest traded price for a given time, while the top of the bar represents the highest price paid. The horizontal line on the left side shows the opening price and its continuous path traces price movements that will end at the closing price.
Currency market charts are commonly used by market analysts who favor the technical analysis method. Technical analysis is mainly concerned with price movements; hence, the use of these charts. This is different from fundamental analysis which relies mostly on economic indicators or in the status of a country's economy to determine the strength of its currency.
Interpreting charts to study market trends might sound like complicated practice. Why not just use fundamental analysis to evaluate currency strengths? According to market analysts, using both is the ideal way. Both fundamental and technical analyses are needed for a trader to make the right trading decisions in the currency market. Using economic indicators or price movement alone as basis for making trading decisions will not give a trader a complete idea of how the global market is doing. And that is what Forex is; a global trading market.
Knowing how to interpret Forex trading charts will give a trader an advantage in terms of making trading decisions. Samples of these charts are available online and a would-be trader can access them easily and use them to practice his analytical talents.
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