With today's sophisticated financial market operating worldwide, world currencies now have their own distinct sets of resources for measuring their worth over time. The general Forex, or foreign exchange market, helps to promote the comparison of different world currencies against each other, and against other assets, to help individual traders and investors take advantage of conditional values for those currencies.
One resource is in the form of currency charts that provide a visual demonstration of the worth of a currency against other assets. If you need to read currency charts in order to get a better idea of currency values, here are some of the basic steps involved in utilizing these financial tools.
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Chart Basics (Candlesticks)
In order to read and benefit from currency charts, you'll need to get them from a legitimate provider. Most of the smaller traders and investors who profit from currency trading use charts that are offered directly from their brokerage services. New online brokerage services often include tools, like currency charts, in order to help their clients understand current pricing. Select a time frame for your currency chart. One of the most important steps in using currency charts, or any other kind of financial chart, is to set a specific time frame.
The values that you view are only relevant to the specific time frames that you establish for them.
How to Read Forex Charts: What Beginners Need To Know
With a paper chart, you can crop the chart for your specified time frame, where online tools often enable the user to change the view to a specific time frame, for example, 1 day, 5 days, 1 month, 3 months, 6 months or 1 year. Observe your currency chart for the desired time frame.
You will see a line graph that represents changes and fluctuations in currency value over that period of time.
How to read Forex charts
Look at your line graph against your Y axis. The Y axis, or horizontal axis, for a currency chart most often indicates a comparative asset price. When a line fluctuates, it shows how your selected currency performs against the currency or asset that is represented in the Y axis.
Check your X axis. The X axis for your currency chart represents your time frame. You will see that both of these axes have scaled, segmented values, where your line graph fluctuates in a variable way.
Look for specific chart structures. Advanced traders and others look for specific visuals in a currency chart to try to predict which way future prices will go. Understand candlestick charting to take advantage of this advanced financial resource.
Candlestick charts show a range of traits for a specific trading day, with a top and bottom that illustrate price movement. Many currency charts include candlestick charting, especially online ones, and by observing these charts correctly, you can know much more about the price than just how it has changed over a period of time. Look for items like Fibonacci retracement. A Fibonacci retracement is a specific kind of price spike or dip where a reversal can signify a general trend.
Read up on this sort of predictive tool and apply it to your currency chart observation. Look for movement against moving averages. Moving averages tell you how the price has changed over a longer time frame. These may be helpful when you are viewing your currency chart.
Understand what the chart consists of. There are no calculations required to interpret Candlestick Charts. They are a simple visual aid representing price movements in a given time period.
Each candlestick reveals four vital pieces of information: Understand that candlesticks display the relationship between the open, high, low and closing prices. This means that they cannot be used to chart securities that have only closing prices.
Interpretation of Candlestick Charts is based on the analysis of patterns. Currency traders predominantly use the relationship of the highs and lows of the candlewicks over a given time period.
However, Candlestick Charts offer identifiable patterns that can be used to anticipate price movements. There are two types of candles: The Bullish Pattern Candle and the Bearish Pattern Candle: A white empty body represents a Bullish Pattern Candle. Understand how to read the Bullish Candlestick Formations: The Hammer is a Bullish Pattern if it appears after a significant downtrend. If the line occurs after a significant uptrend, it is called a Hanging Man.
A small body and a long wick identify the Hammer. Understand how to read the Bearish Candlestick Formations: A Long Bearish Candle occurs when prices open near the high and close lower, near the low. Understand how to read Neutral Candlestick Formations. Spinning Tops is a neutral pattern that occurs when the distance between the high and low, and the distance between the open and close, are relatively small.
Understand how to read the Reversal Candlestick Formations: A Long-legged Doji often signifies a turning point. It occurs when the open and close are the same, and the range between the high and the low is relatively large. How do I know when to enter a trade and exit? It's not possible to give you a good answer. Successful forex traders will tell you there is an art and a science to it, a mix of knowledge, intuition, and luck. Even for experienced traders there's an element of gambling involved.
Not Helpful 0 Helpful 0. What do "closing" and "opening" mean in Forex trading? They are respectively the final and beginning prices of a specific currency in a trading day. Not Helpful 3 Helpful Already answered Not a question Bad question Other.