Understanding Foreign Exchange (FOREX) trends is a piece of cake to those who specialize in financial analysis and currency trading. However, anyone can learn the ropes of interpreting FOREX trends by first learning how to read FOREX charts. Understanding a FOREX chart is necessary if you want to ensure profitable trading.
1) Familiarize yourself with the different types of FOREX charts.
Various patterns illustrate FOREX charts, such as lines used for line charts, vertical bars for bar charts, candlesticks with a wick at each end for candlestick charts, and Xs and Os for point-and-figure charts. Trend lines keep track of the rise and fall of FOREX prices with inclining and declining lines. Triangle FOREX charts, on the other hand, show symmetrical patterns that break at the top when it’s wise to buy, and break at the bottom when it’s wise to sell.
2) Determine the time frame to follow.
A FOREX chart shows fluctuations over a variety of time periods. You can follow a one-day, four-hour or one-minute chart. Many FOREX systems trade with more than one time frame, so that you can make an accurate, “high probability” trade. However, some systems look for broader and bigger moves in the currency market — that is why they use only-one-time-frame daily systems.
3) Maximize your layout by making sure it shows the correct and updated version of your preferred time frame displays.
Different time displays project different forecasts; hence, it is a crucial factor in reading a FOREX chart. Hourly displays show a much bigger scenario in comparison to minute displays. Remember that market strategy and analysis depend on the real-time charts or time frames.
4) Look into the basic elements of a FOREX chart.
FOREX charts show currency quotations laid out in pairs, with each pair bearing the same quotation. For example, for the currency pair EURUSD, the first part (EUR for Euro dollars) is the base currency, and the latter (USD for United States dollars) is the terms currency.
5) Keep in mind that a FOREX chart always quotes a currency pair in similar fashion.
For example, if the chart shows a fluctuating value for the EURUSD at 1.2345, it only means that every 1 EURO can buy 1.2345 USD. The face value of the currency pair is the base currency; in this case, 1 EURUSD is 1 EURO. FOREX charts will show a two-dimensional price quotes – one is for the bid and the other is for the asking or offer. The bid price is lesser than the asking price. Purchase currencies based on the asking price.
6) Check out price trends to determine when to buy or sell.
You can place stop orders when the currency fluctuates upward or downward. “Stop if bid” is the order you’ll use if the major trend is upward, while “stop if offered” is for downward major trends. Trade movements depend on how strong the prevailing or major trend is performing against the minor trend. Both trends may fluctuate extensively during the day, so it’s important to note how each trend averages on a daily, hourly or by the minute time scales.
• Currency rates are the first indicators of economic changes. Politics play a big role in shaping the future of the market, so aside from FOREX charts analysis, always keep a close watch on what’s happening locally and globally, to determine your next move.
How to Read Currency Charts- http://www.forex-day-trading.com/forex-charts.htm
How to Read FOREX Charts and Act Effectively- http://www.goforex.net/reading-charts.htm