There are many pieces of advice telling how new and experienced Forex traders can improve their trades and ultimately their fortunes. Within much of this advice is the concept of how to read Forex charts and analyse them to make investment decisions.
In addition, many of the professional trading platforms feature or contain Forex charts as part of the features and benefits they offer to traders.
Therefore, an important question is what exactly are Forex Charts, how can they help and how are they read?
What is a Forex Chart?
A Forex chart is one which contains detailed information relating to Forex trading. Every chart is different and each can be altered to include information which the particular user wishes to see. Therefore, one chart might contain detailed information about a particular currency, its’ historical performance and predictions for the future (based upon existing trends), whilst another might show the economic growth of a particular geographical area. Therefore learning to read a forex chart while time consuming is important if you want to try forex as an investment platform.
Different traders use and rely upon different types of charts. However, reading charts is a universal skill which is likely to benefit all users.
In addition to having different types of charts which display different types of information, there are also different display types. Just as graphs tend to come in a variety of forms, as do Forex charts. Whilst some display certain information types better than others, a lot of the options come down to personal choice: how does a particular trader like to see their information being displayed?
The first display method is known as “Japanese Candlesticks”. Candlestick charts are most often, and most effectively used to display prices, and many people use them not only for displaying the information but also as they start to analyse it and in predicting future behaviour.
Prices can also be displayed in line charts. However, whilst a Candlestick chart might offer a chance of detailed analysis, line charts offer simplified information which is useful for the trader who simply wants to view the opening or closing prices for certain periods and nothing more.
The final way of displaying prices is by way of a bar chart. A bar chart works in a similar way to a candlestick chart in that it offers a range of information rather than a simple price chart. Additional information which might be seen on a bar chart might include opening and closing prices but is also likely to include fluctuations and patterns during trading and can often help a trader to plan out their strategy.
Although the concept of charts is one which is universally popular, many traders (especially when starting out) are unaware of where to view charts. There are two main ways. The first is what many professional traders choose to do which is compiling their own charts. In being responsible for the growth of their own charts and the data which goes into them, many traders can build up their knowledge before they even start to analyse.
The second method is in using a broker (such as FXCC.com) who provides charts and data for analysis by their users.