Forex trading necessitates a lot of education and practice. One of the basic skills for trading forex is reading of forex charts. Usually, forex traders depend on real time charts that keep them informed of the current market position and thus trade accordingly. Nevertheless, understanding and interpreting of these charts requires practice and talent. XFR Financial Ltd helps traders with this particular task, but still, some consider it as a science!
Importance of forex charts at XFR Financial Ltd
Chart patterns facilitate the dealer to stay focused on price movements without assessing the reasons causing those movements.
Getting latest information about changes in prices allows the dealers to not only to keep a watch on the news but also know how other dealers respond to the latest news.
Trends are visible and are cyclic in nature. A trader, on acquiring the skills for understanding the system, can assess trends from the preceding week, month or year to trade suitably.
Possibly, the easiest of all forex charts, it focuses on the closing price of a given currency. All that you need to do is draw a straight line from one closing price to another to know price movement of the given currency over a specified period of time.
Compared to line chart, this chart is a bit more complex to read and understand. Its benefit is that it gives more accurate detection of price movements. While disclosing the opening price as well closing piece, it also tells you the low and high price of currency you may be interested in. It consists of vertical lines, with each line illustrating the variation in price (from lowest to highest) over a unit of time that may be just one minute or any hour of the trading day. The chart also has tick marks, which project out from both the ends of the line, to specify the opening price (for instance in case of a daily bar chart it would show opening price for that day to its left) and the closing price for the same time period is shown to its right. It is a normal practice to use different colors for bars to indicate if the prices fell down or went up during that period.
Compared to other forex charts, candlestick chart is easier to read and interpret. Many would value it for its convenient pattern, facilitating evaluation of likely trends and changes in prices. It is a combination of line chart and bar chart, with each bar representing all the four noteworthy pieces of information for any preferred day: the open, the close, the high and the low.
To get a better understanding of this, imagine a candle held in vertical position with its wick projecting out from both the ends.
A candlestick usually consists of a body (the candle itself) that can be black or white, with an upper and a lower shadow (wick.) The area that falls within the open (price) and the close (price) is termed as the real body (candle.) Price movements beneath and on top of the real body are known as shadows. The wick demonstrates the lowest and highest traded prices of any chosen currency during a defined timeframe. The body demonstrates the closing and opening prices. If the closing price is greater than the opening price, the body of the candle is shown in white with the opening price at its bottom and the closing price at its top. In case the closing price is lower that the opening price, the body is shown in black with opening price on its top, while closing price is shown at its bottom. Modern candlestick charts often replace white and black color with red (for a lower closing) and blue or green (for a higher closing.)
There are a number of charts available on the Internet and usually you can upload these on your website. Charts are crucial when you want to a have a look at the current trends. Yet, proficient forex traders refer to more detailed and refined forex charts which can be loaded in real time.