Tips on How To Read Forex Charts

Charts are very important in Forex exchange as they aid in monitoring the rate change of the currencies that you are trading. There are many types of charts that you can use in monitoring the change:

Line Chart

A line chart draws a line from one closing price to the next closing price. When you string the lines together you are able to see the movement of the currency pair over a period of time.

Bar Chart

This one is a little bit complex and it shows the opening and closing prices. It also shows the highs and lows of the trade. The bottom of the vertical bar shows the lowest traded price while the top of the bar shows the highest price paid.

Candlestick

This is the most popular chart used in Forex trading. The main function of this chart is to serve as a visual aid. There are many reasons why candlestick charts are common: they are easy to use, interpret and are excellent tools in helping you in identifying the market turning point.

If you are a beginner you are on the lucky side as the chart comes with cool names such as "shooting star" which helps you in remembering what a given pattern means.

How to Read A Forex Chart

Do you want to know how to read a Forex chart? Here are tips on how to go about it:

You should start by locating the chart that you want to analyze and then find a range. Remember that charts show both short periods (such as 12-24 hours) and long periods such as weeks and months. As a beginner, you should start with charts that show short periods.

To easily understand the data presented you should begin with a single data bar. Here you should locate the open and close prices that are indicated by the horizontal "pegs" on the chart bar. If the close rate is higher than the open rate, the rate is definitely trending up. If on the other hand the open rate is higher than the close rate the rate is trending down.

You should note the areas where the chart hits a low for a number of times, but it doesn't drop below a certain rate. These are important places of support where the market forces prevent the rate from plunging.

You should also locate places in the chart where there are several highs in the same range. These places indicate resistance.

You should note that both support and resistance can easily break when there is some external factor such as negative or positive news.

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