How to Read and Understand Currency ChartsCurrency charts are easy to interpret, especially for someone that has traded stocks in . To use forex trading charts to your advantage it’s important to have an understanding of some of the principles of technical analysis. The complexity of some charts created for technical analysis is truly amazing although it’s interesting to note that there are only five bits of data that can be used to construct these. The bar chart adds a few more important pieces of data into the chart and provides a level of detail that is needed to analyse more complex trading manoeuvres.
More detail is added to the bar chart through adding indicators for opening and closing price. The history of the candlestick chart is very interesting as people believe that they were introduced in the 16th century by a Chinese rice trader.
Choosing your favourite chart type will also be influenced by the type of trading strategy you are using.
Whatever method you are using you will find that users of technical analysis are fiercely supportive of their methods and understanding the quality of information they are able to gain from their insight from the forex trading charts is truly impressive. People keep asking me how I do my chart analysis, and I keep saying I'd have to write a book to explain it all.
There is often a big debate between the traders that plan their trading using fundamentals and those that use technical analysis.
There are some really effective day trading strategies that plot two moving average (one 3 minutes and the other 20 minutes) lines on the graph and the trade entry point is when the short line crosses the long line.
A tall bar means that there was a large variation in price for that period of time and a short bar shows there was very little movement.
There are certainly hundreds of books available on the subject and reading candlestick charts is thought to be quite an art.
Building up the skill does take time but to gain a usable level of knowledge can be picked up pretty quickly so it is a really powerful tool to add to your trading resources.
Once you get used to this type of chart it is very likely that you will become closely attached to using them. People often trade up and down between these lines when they are identified getting in and out of trades for the same currency pair on a regular basis. Day traders will clearly only really be focused on the current days activity and will be using charts that plot prices every minute.
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