Forex Charts

Forex charts are the bedrock of technical analysis. Technical indicators are usually added to forex charts as a way of making sense out of the candlesticks and bars that define price movements. The sole aim of technical analysis is to be able to use the information on the charts to be able to make a determination of the future price action of the traded Currencies. Knowing how important this topic is, a lesson in using forex charts will definitely not be out-of-place.

What Information can be obtained from Forex Charts?

1)      Forex charts tell the trader what the present state of the currency pair in question is. For instance, if you are an offline currency exchange operator, the best information as to the currency exchange rate of a particular currency pair is from the forex chart. You may even be a traveller just wanting to make sure you do not get stiffed on the streets. If you want to get an idea of what the current exchange rates are, your forex charts will give you that information.

2)      For spot forex traders, your forex charts are your gateway to a horde of information that will help you make informed trades. One way of using forex charts to your advantage is to check what the candlestick patterns are saying. How do you know if the exchange rate will perform a reversal in the next one hour? You can get this information by looking at the hourly chart and seeing what the candlestick pattern that has formed at the close of the hour says.

3)      There are a variety of  electronic trading platforms such as Meta Trader, that provide forex charts for trading the foreign currency exchange markets.

According to Wikipedia Forex is:

The foreign exchange market (forex, FX, or currency market) is a form of exchange for the global decentralized trading of international currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. The foreign exchange market assists international trade and investment by enabling currency conversion.

Some Key Points in Using Forex Charts

One area where traders make grievous mistakes is in the area of trade entries. If you are trading an hourly chart for instance, and you want to get into the trade, where would you make an entry? Would you enter the trade in the middle of a candle, or would you wait for a candle to close before making an entry? It may be preferable to wait for the candle to close and then make an entry at the open of the next candle. Let’s take for example a trade where the trader is making an entry based on a candlestick pattern. If you are trading on a candlestick pattern, the only way you can be sure of what the candlestick actually is, is by allowing it to form completely, and this can only happen when the candle has closed at the end of an hour. If you jump into the trade based on what you think the candle is, you may be surprised that a late burst of activity by traders may change the look of the candle to something completely different, with a different outcome for the trade. Surely you would not want to get caught out by such a play.

Another area is in trend determination. True market activity can only be defined over weeks or even months, and not by daily movement. The big money market players are the ones whose activities pull currencies. A central bank can flood the market with billions of its local currency within minutes, and change the course of that currency (a bank intervention). Before making such decisions, the central bank board members would not make a decision based on the activities on its currency for a day, but would rather look at a pattern that has formed over a long time. Therefore, traders should use longer term charts for determining currency trends.

If traders apply these tips on using forex charts, they would definitely see positive changes in the outcomes of their technical trade analyses. You can read more information about trading using Forex charts at ForexAccounts.net.

About the Author:

This article was written by Adam Green, who has more then 10 years experience trading in the Forex, binary options and commodities markets. He also runs a number of his own financial trading websites with trading strategies and analysis.