Foreign exchange trading is not complete for a beginner without getting through various forex price charts. For knowing the capacity of the currency market, it is essential to read them because of that aids in earning bigger gains. That’s a sign of success and a path to an alluring future for traders. There are vast to smaller guides depending on the experience needed by a market participant. Brokers like PrimeFin, ABinvesting, etc., can assist the enthusiast in that.
These charts were drawn with hands in the past, but as technology took over, computer devices started doing the job accurately and in less time. These charts are vital in deciphering fundamental and technical analysis.
Dow theory and forex trade charting
Technical analysis has been the most important part of forex trading for years now. Dow Jones, the founder of DJIA (Dow Jones Industrial Average), helped it go mainstream for traders. Today, people are using the charting process in recognising the forex market. Today, several theories prescribed by Dow are followed by forex traders.
It values the understanding of trading volume in the market that can be understood by forex price charts.
What is forex price charts?
It is a chart that lets you know the rate of exchange between two currencies or pairs. It graphically displays the historical and current trends and behaviour of the market and various currencies. It also depicts the changes in price over time. For identifying various movements, trends and patterns of the market, trade analysts and day traders use these charts in their favour.
It helps them chalk out exits and entry points, reversals and continuations of currencies. Thus, trading appears straightforward with the application of forex price charts. A trader has a choice to check the currency chart of their favourite or tradable pair. For example, if you are willing to find out information about EUR/USD or GBP/USD, it is easily available through a few clicks.
These days, forex traders are utilising several packages of forex charting software that assist in determining the likelihood of a chosen currency or pair in the market in conjunction with different tools and available techniques. For fetching an edge over competitors, forecasting software aids in predicting the forex market to traders.
Charts help pin out the points on which history is likely to repeat itself and offer massive profits to traders. Also, in hindsight, traders can predict when not to invest funds. That’s another added benefit.
Pattern recognition helps buyers and sellers to make up their minds whether to trade in the market or not. The consensus moves like a pendulum between greed and fear for market participants. It depends on the periodic timing of the news.
In-depth understanding of forex price charts
The past can predict the future through its various patterns, as per experts and trade pundits. That’s where forex charts step in for market players. Traders can track the past and see the road to what might happen sooner or later in the currency sector. Many forex brokers are readily offering forex charting without charging a penny. A funded and open trading account is the basic requirement to get that facility. Forex charts offer deep information about a specific currency pair.
These charts reveal the trends’ existence, which can be followed to invest money on time. The technical indicators on these charts tell how important the methodology of different currencies’ supply and demand is for making losses and profits.
Here, the rallies of currency pairs are more important than buyers’ and sellers’ current account balances. If they can get the speculation with precision, reaping the rewards is a different story.
Precisely, three types of charts are used for determining forex prices: Line, Candlestick and Bar. They can utilise normal time frames from several platforms’ charting software. That can provide the range from yearly data to tick data.
Primarily, the exchange rate is displayed on the y axis, where’s the time on the x-axis.
Technical indicators and forex charting
For technical indicators, forex price charts will have customisable settings that may help fuel the capacity of trading to the optimum, for acknowledging prices, volumes and open interest.
Two of the commonly used technical indicators are:-
- Oscillators: These technical indicators change or oscillate between a local maximum or minimum and plot or display, below or above the price chart. Some of the top illustrations include the Relative Strength Index (RSI) and MACD(Moving Average Convergence Divergence).
- Overlays:- These indicators are kept right on the price portion of a chart, implying its name. Indicators become aligned by overlaying them. A similar scale is used in it. For example, Bollinger Bands and Moving Averages.
Different charting software will have diversified technical indicators supporting them during forex trading. A trader has to select from a myriad of options. So, it is best in the trader’s interest that he/she find the best broker or option that suits them perfectly for them.
Moreover, these indicators can be employed in automated trading systems that increase trading productivity in the financial market.
Practice forex price charts
It is always recommended and preferable to practice anything new and complex on a demo or practice account. Forex charts also fall in the same category. One should study them and read them by placing bets in demo accounts offered by various forex brokers. Moreover, it is good to try different brokers and their facilities before selecting one for funding. The exercise helps in suggesting which is the suitable broker for a market participant.
Types of forex price charts
Different forex charts best describe visual representations of forex markets.
Bar chart: This chart deciphers the categorical data using rectangular bars with lengths or heights proportional to values or prices they represent. These bars can be plotted differently, horizontally and vertically. In a single line, there are three visual cues embedded in one line. Sometimes, a vertical bar is known as a column chart. It discloses comparisons among discrete categories. For example, the size of the vertical line showcases a small point within a period.
Meanwhile, the one on the right side displays the closing level and the other exhibits the opening level. The fluctuation in a bar chart is seen because of the way it is constructed. The left side horizontal hash dictates the opening price, while the right side one the closing price. With the big fluctuation, the price bar becomes increasingly fluctuating.
Line chart: It is considered the most basic chart for forex traders. For the selected time, it connects the closing prices along with other little information. However, it comes in handy while assessing the trend of the market. It is due to the cues like higher lows and higher highs. Graphs of this chart track changes of long and short periods. Line graphs are superior to bar graphs during small changes. For more than one group, a trader can use it to compare changes for the same time.
Point and figure chart: These charts use Os and Xs to measure currency pairs’ price change over longer periods. Interestingly, by only adding Os and Xs, market participants can trade several years of trends starting from one year on a small chart. In addition, it plots price movements for various currencies, from major to exotic. The passage of time does not hold any value here. It is one of the disciplined ways of ascertaining emerging forex market trends.
Candlestick chart:- It is also called a Japanese chart. This is because it describes the price movements of varied currency pairs. Moreover, it is also considered an improved version or valued added bar chart for traders. It comes with two important elements, shadow and body. The body of this chart exhibits the range between the closing and opening prices. The body size showcases the move made by the prices during a certain time. Notably, a candlestick can sport a lower shadow, an upper shadow, both at the same time or none at all. Shadows offer cues on future price movements and price retracements.
Advantages of Candlestick charts
- Candlestick charts are one of the best when it comes to getting price alerts for forex. Moreover, the interpretation is relatively easy.
- Candlestick charts can best grab market turning points compared to others. People can learn about trend reversals that are useful while investing money in any currency pair. From a downtrend to an uptrend and vice-versa can be detected by a trader within a frame of a few minutes.
- The chart is more adaptive compared to others. The reason for it is the bar notation that comes along with the Candlestick chart. Its visuals are helpful in research and simple to understand.
Heiken-Ashi chart: The chart is an improved version of the candlestick chart. It utilises averages for tracking trends. The factor of uniformity is something that finds the Heiken-Ashi chart ahead of candlesticks. Thus, a trader does not have to make major adjustments or efforts for tracking any type of performance laid by a currency pair. Also, a trader is not required to read between the lines. Thus, that casts away the complexity for market players. Interestingly, in Japanese, it means average bar. It uses a modified formula used in candlestick charts.
Renko chart: When there is a certain amount of movement in the prices of a currency, Renko charts post a brick. By following the bricks, traders can know how much the change in the prices. It looks like a two-coloured brick. In addition,Its filters make price detection simpler.
Conclusion:
Traders have different forex price charts for their selection and calculating the risk and profit percentage while they invest their money in the market. Every chart has different specifics. Some emphasise on the past market theatrics or history, while others pay attention to the current and the future scope. However, before reading the chart, one needs to observe the market and learn to read them. It is a complex method. However, brokers like TradedWell, 101investing, ROinvesting, etc., help offer tools that are great when used with charts.
FAQs
Define the forex price chart
A forex chart shows the data of various currencies and currency pairs concerning their current and historical performances. That helps in acknowledging how the future market will unfold for investors. Thus, they can strategise and take their time planning and placing their bids according to time. A chart graphically depicts the situation of the market that ensures market players fully get information and description.
How to find forex price charts?
A trader can use forex price charts online or through brokers. They are readily available for market participants. However, it is necessary for traders to understand and read them properly to deduct the current market situation. Moreover, websites specialising in forex information provide details regarding the forex price charts.
How to read forex price charts?
Reading a forex price chart is not that complex as someone might think it to be. The vertical bar’s bottom displays the lowest traded price for a particular time. On the other hand, currency pairs are indicated by vertical bars.
What are the top types of forex price chart analysis?
There are three types of basic and most important forex price analysis that are sentimental, technical and fundamental. They help shape a trading strategy and guide traders to make the most of the opportunities in the trading market.
Is the currency form chart different from the regular forex price?
No, they are not different. They are synonymous with each other. Thus, it can be used interchangeably.
