Although fundamental analysis formed the basis of trading decisions for many years, today most traders rely far more heavily on technical analysis and this means that they must also have the ability to read Forex charts.
There are several different price charts available to traders but they all essentially convey information about Forex prices for a specific time period which can range from just a matter of minutes to many years. Charts can be plotted in different formats ranging from simple line charts to more complex candlestick charts, plotting price variations for particular time intervals.
Most traders will be familiar with line charts as this is a very common format for plotting a range of financial data and most of us have grown up with line graphs. Here closing prices are normally plotted for a particular time period and such charts give a very clear and easy to read picture of movements in prices over that time period.
Bar charts are generally more difficult to read, but have the advantage of being able to convey much more information. For example, the length of a bar can indicate the price spread for a given period of time, so that the longer the bar the greater the difference between the high and low price. Bars can also be annotated to show the opening price on the left of the bar and the closing price to the right, enabling you to see at a glance whether the price has risen or fallen. One disadvantage with many bar charts is that they often put so much information onto a chart that it can be difficult to read, although modern software enables you to adjust a chart to focus in on the specific information you require.
A very popular charting technique today is known as candlestick charting, which was originally invented by the Japanese for analyzing rice contracts and is essentially a color coded variation of standard bar charting, with red candlestick bars indicating falling prices and green candlestick bars representing rising prices.
Reading candlestick charts takes a bit of getting used to but the various candlestick shapes when viewed in relation to neighboring shapes form a number of classical patterns. Nor surprisingly, many of the patterns have acquired names over the years and these include such delights as 'Dark Cloud Cover' and 'Morning Star'. Although it takes a bit of time to master the art of reading candlestick charts, once you become familiar with the different patterns it is fairly easy to see just what is happening in the market and to pick out particular market trends.
Of course charts by themselves, while extremely helpful, do not tell the whole picture and so it is necessary to supplement the information provided by the various different charts with a combination of different technical indicators such as relative strength indicators (RSI), Bollinger bands, average directional movement (ADM) to name just three. Nevertheless, there are fewer and fewer traders today who do not rely to a very large degree on charting for their trading decisions.
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
The Barclays Hello Money looks very ...
By: arllyn | 01-09-2008
The Barclays Hello Money looks very interesting, where can I get more information about it?
How to identify dollar bills. The bill is a mis ...
By: Gwendolyn Webb | 31-08-2008
how to identify dollar bills. The bill is a mis print error. The front only has the seals printed with serial number F 90683680 F. Also four 6's. What year is it?
Attorney-in-fact
By: geneva doss | 31-08-2008
what to do if attorney-in-fact nelects the principal takes principal money and put it is her name in a money market
I'm 55 and divorced. I have credit card debt, a ...
By: noregretinludlow | 31-08-2008
I'm 55 and divorced. I have credit card debt, a mortgage, and car payments. I work full-time and part-time. I also have a military retirement. Please recommend a budget for me to eliminate my debts (especially those high interest payments!) and build up my retirement.
How much is old money worth?
By: wtpmharrell | 30-08-2008
I have some Japanese money from World War II and I am trying to find out how much it is worth, is there a web site that can give me that info?
Unemployment Benefits Appeals decision
By: Help Me | 30-08-2008
My husband lost his job as a result of filing a discrimination case against his employer, when he filed for unemployment they lied and said he was discharged for misconduct, the unemployment agency agreed with the employer until my husband appealed and they heard the facts, then they reversed the decision and back paid him almost $3.000.00 dollars, now almost a month later the employer comes back again for a second appeal to get the judge to make him pay his wages back, he got his letter of decision today that read
" The application for review has been given due consideration by the Commission. The commission finds the decision of the Appeals Tribunal should be affirmed because it is fully supported by the competent and substantial evidence on the whole record and it is in accordance with the revelant provisions of the missouri Employment Security Law. The commision adopts the decision of the Tribunal as the decision of the commission in this matter."
The Tribunal is the one who overturned the first denial in my husbands favor.
Can somebody tell me if my husband won or lost this appeal???
Q&A Powered by: