By definition, a Forex chart is a graphical representation of historical behavior over varying time frames of the relative price movement between currency pairs. Technical analysts and day traders look at Forex trading charts to identify trends and learn patterns that signal reversals, entry points, continuations, and exits.
This article will go over all the important Forex trading charts and explain how to understand them.
Significance of Forex trading charts and chart learning
Forex trading charts are very important if you want to become an expert. You can not always rely on other people’s interpretation of Forex trading charts. With the right amount of knowledge and understanding of Forex trading charts, you can excel forward steadily in your trading.
A chart shows a trading activity during any trading period. Price changes in Forex trading are not consistent. However, they do sometimes follow the same trend. The Forex charts exactly provide us with that information.
With a chart, it is easy to identify and analyze a currency pair;
Each chart has an x and y-axis. The y axis presents the price scale, and the graph’s x-axis presents the time scale. These parameters are the same for all Forex trading graphs.
A Forex trading chart shows an aggregation of all the buy and sells transactions. Additionally, it also incorporates the current and future expectations and well-known news.
Types of charts
There are three major types of Forex trading charts;
Let us briefly go over these chart types and explain them to our users.
A line chart is a simple representation of one closing price to the next closing price in a line.
With the help of a line chart, we can see the general price movement of a currency pair over time. The line chart is simple to follow. However, it doesn’t provide much detail about the price behavior within a certain limit.
The line chart shows us the price of a currency pair X at the end of a session. It does help traders compare closing prices between sessions and understand the price trends which influence a currency pair.
A bar chart is a little more complex than a line graph. It shows;
- Opening prices
- Closing prices
The bar chart helps the traders measure the price range within a certain period.
The bottom of a bar shows the lowest traded price, and the highest bar indicates the highest traded price.
It is the third form of Forex trading charts.
The Candlestick chart shows similar information as a bar chart. It has an overall nicer graphical representation as well. A candlestick chart shines in terms of convenience, and it is very easy to read for traders.
The bars in a candlestick chart show a high-low range with the help of a vertical line.
Several Forex trading charts help users understand the trading pattern easily. Charts are an essential part of forex trading south Africa for beginners.