Forex trading is a very lucrative line of investing. However, to be successful you would need to make serious decisions such as the currencies to pair and when to do so. You may need to do plenty of research to be able to maximize your profits. There are so many ways of predicting currency value movement to help you make the right decision and Forex trading charts are some of the best in making the comparisons.
The charts are designed to show performance of particular Forex currency. Using the charts, you can check the historical performance of the same, so you can determine how suitable it is to make a move. The charts record several prices in specified timeframes making it possible for you to view high price, average and low price of a currency you are interested in compared with others. With this information, you will be able to do trades of the stock as predicted by the charts. The charts are definitely helpful for any serious Forex trader or investor.
Forex chart types
The charts come in different types and the most popular and commonly used are bar charts, candlestick charts and line charts.
Bar charts – They are a bit complex and designed to show opening and closing prices. Using these charts you can also view highs and lows. They contain a vertical bar which indicated lowest traded price at the bottom during a specified time period. At the top of the bar is the highest price paid indication. The bar also has a horizontal hash on left side showing opening price and on the right side of the horizontal hash is the closing price. A bar simply means one segment of time, whether it is an hour, day or week.
Line charts – The line charts are simple to use and read. They have a line running from one closing price to the next. When the two periods are together, it becomes possible to see the general price movement of the currency pair within a given period of time.
Candlestick charts – These charts are very similar to bar charts only that they come with graphic formats that are much more attractive and pleasant. They use a vertical line to indicate high to low range. In this kind of charting, the middle block of the line which is largest indicates range between opening and closing prices. This block is usually color filled when the currency closes lower that it opened. The candlestick charts are majorly for visual aid because they have the same information found on bar charts. Most traders prefer the candlestick charts because they are easy to interpret and give beginners an easy time figuring out chart analysis. They are also easy to use and the patterns come with exciting names to help you remember what they mean.
Common charting periods
The different trading charts all illustrate price movement over a period of time. This means that there are charting periods you should get familiar with depending on what matters to your trades. The market view can drastically change when you switch to a different time horizon.
Monthly charts – They are Forex trading charts that illustrate price movement over a longer time horizon. Long term investors will find these kind of charting most suitable; they can represent years of price data for that particular market.
Weekly charts – They also make good options for investors and trader with a longer term time horizon. If you wish to analyze intermediate term time, you will find these charts appropriate. They are usually used to analyze periods in six months excess.
Daily charts – They are one-day interval charts and are the most commonly used charts by investors. They analyze periods in six weeks excess and come in handy for short and intermediate term time periods.
Intraday charts – These charts illustrate the movement of prices within the daily opening and closing bells of the given market. They can be divided into Intraday hourly charts, 15 minute charts and even 5 minute charts. These shorter period charts are great for scalping and day trades that last few minutes, a few hours to a few trading days.
Why use the charts?
Forex trading can be very profitable when approached strategically. The trading charts offer a much easier way for investors and traders to make their decision because they:
· Come with multiple time frames that allow traders to see market patterns and trends easily
· Have customizable tools that allow every trader to get a fit that is just right for their trading needs
· Feature overlay of a number of indicators for each currency pair or commodity in the market
· Offer assistance to traders, especially in making decisions in real-time
Most brokers offer the charts free to trader who choose to use their platform. This way, they are able to keep them active in the market. You may have immediate access to the trading charts as soon as you open an account with your Forex broker of choice. Alternatively, you can choose to pay for the data feed whose price will depend on the markets being traded. Using a broker is a much more affordable option and you may want to consider this, especially if you are just starting.
Choosing the best chart
A good chart should be easy to use on any given platform. You really do not want to take forever trying to be proficient in using software because you may just lose too much of valuable trading time.
The charting package that you choose should also give you an easy time downloading and setting up. Most packages include detailed setup instructions as well as user manuals which ease your learning.
Choose a charting package that offers trading indicators for different trading strategies. You should be able to see where your trades take place without necessarily being overwhelmed by too much coding.
Consider the time frames so you can get updates under the most appropriate intervals matching the investing window you are interested in.