Charts are an essential weapon for every trader to have in their arsenal as well as the ability to read them and understand what they represent and what perhaps will be the direction they are going to follow. Understanding forex charting is as much as a tool as it is your accomplice, it’s what will guide you into identifying trends and the important price points that will show you where you should enter and exit the market that will then lead you to reaching the success you have been working for and to unlocking that infinite door of bounties that the online trading world can give.
Before understanding what each chart represents and why is it important, all traders must familiarise themselves with the most essential charts used in forex charting. Whether you are a novice or an experience trader your knowledge of forex charting is what will always keep you one step ahead in knowing which data should you look out for first and which comes second before going ahead and establishing your next move. Successful traders and investors know exactly how to use the data within the language of the charts to their optimum advantage.
The first and the simplest kind of charts used in forex is the Line Chart. The Line Chart is made up by two variables, the lapse of time and the closing price of a currency during that specific time frame. In forex charting the Line Chart is usually used to track just one currency pair at a time but depending on the traders software it can be formatted to monitor various currencies at the same time. When the points of the chart are strung together this is typically an illustration of the movement of the currency from day to day trading.
The second most commonly used kind of charts in the market is the Bar Chart that on some occasions are also known as OHCL. The variables it represents includes the opening, closing, the lowest and the highest point of a transaction, ergo the name OHCL. In each bar the typical X and Y axis illustrate the highest and lowest points, the lowest being the lowest traded price for the given currency pair and the highest, the highest traded price of the currency in the specific time period. Additionally the vertical lines are joined with two horizontal hashes with the left one illustrating the opening price of the currency and the right one the closing price.
The third and final most commonly used kind of forex charting which is the also the most preferred one by both novice and experienced traders is the Candlestick chart. The Candlestick chart is more attractive to traders because it offers a lot more information about the currency pair the trader is interested in. the Candlestick takes its name from its form and it provides an illustration of the high, low, opening and closing prices of a currency pair. The area of the chart which is known as the ‘body’ defines the open and close price of a trading session and the ‘shadows’ above that level reflect price excursions. The wick of the candle at its highest reveals the highest traded price of the currency par in that given time period with the lowest respectively revealing the opposite. Typically wen a pair opens higher than what it closes the body of the candle is green whilst if it opens lower than what it opened its red, but the colouring of the chart may vary.
All traders should be aware that their ability in reading the various types of forex charting is vital for their own successful trading performance. Which is why when traders are on the market for the most suitable forex broker for them they should keep in mind that a well-rounded forex broker should offer its traders the most accurate, precise and up to date data in charts in order for its clients and traders to have the ability to run in the same pace as the market and never lose a single beat.
Along with the charts themselves, traders should also seek to the educational sections of their platforms and stretch their knowledge of the market and forex charting to the maximum. HiWayFX offers its traders and investors an extensive library on the language of forex charting as well as access to the most sharp, detailed and factual charting software available.
