Are you planning to start trading in the forex market? The most important aspect of trading is knowing how to read the charts. If you read them the wrong way, you will likely make the wrong trade, which could cost you money. The following outlines the various forex charts and how to best read them.
What Are Forex Charts?
Forex charts are graphical illustrations of the price fluctuations of a particular currency pair within a specific time. The vertical axis shows the price, while the horizontal axis shows the time-lapse.
At zenfinex.com, you can choose these fluctuations by selecting the time frame you want to see. For instance, depending on your preferences, you can choose from minutes to months. The complexity of these charts varies from one to another. Therefore, understanding how each works will allow you to choose the most conducive for your trading needs.
A line chart is among the most commonly used in trading on forex. The line chart shows the price of the selected timeframe. The chart consists of a combination of various close prices, hence explaining why it forms a line. It is one of the easiest ways to represent data on forex because it does not include complex details such as low, open, or high prices for a given period. It is best when used on long-term trends.
A bar chart shows the low, high, opening, and closing prices, making them more complex than line charts. The bottom part of the bar shows the lowest price for the specific period. The top part of the bar shows the highest price. The vertical bar displays the currency's trading range.
The left part of the horizontal bar indicates the opening price, while the right side shows the closing price.
As the name suggests, this chart represents prices using sticks resembling a candle. Every candlestick indicates the price movements over the selected period. For example, if you chose a 30-minute time frame, every candle stick would show the price changes within 30 minutes. However, the candlestick on the chart's right side indicates the current prices for an incomplete period.
A green candlestick means that the currency pair increased in price during the chosen period., It shows that the currency closed at a higher price than its opening one. The red candlestick shows a price decrease, and the currency closed at a lower price than its opening one.
The candlestick is one chart that provides sufficient information about market conditions. The candlesticks show whether the sellers or buyers have control of the market. For instance, a long green stick indicates a lot of buying, while long red sticks show a lot of selling. If the candlestick has a short body, it shows pressure in a specific direction but changes course before reaching the period's end.
It is similar to the line chart but has a shaded area beneath the line. The shaded area creates the shape of a mountain, hence its name. It is also one of the easiest charts to read during a long-term trade. It does not show the open, high, and low prices of every chosen period and, therefore, is not ideal for short-term trading. It only shows the closing price, which is needed in long-term trades.
The above charts introduce the basic concept of forex trading. Now that you know how to read the charts, it's important to move to an advanced level of technical analysis. It will help you predict the prices while making real trade. Also, choose the chart which you feel works best for you.