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HOW TO READ FOREX PRICE CHARTS?
Forex Price Charts, what DO they mean and HOW to use them?
Important numerous facts as discipline, trading rules, not being
greedy etc., but one of the most important things is:
LEARN to read the charts as Charts represent the lifeblood of
the market.
I admit that reading charts, and interpreting patterns, are more
an art than a skill. Base and apply your entry and exit
decisions on YOUR OWN combined methods of technical and
fundamental analysis.
FOREX charts, are easier to interpret and to use. They reflect a
slower moving, stable economy of a country, compared to the
stock market, with its daily drama of company reports, Wall
Street Analysts and shareholder demands.
Unlike stocks, currency charts do not spend much time in trading
ranges and have the tendency to develop strong trends.
Furthermore, Forex with its 4 Mayor currencies is easier to
analyze than tens of thousands of stocks.
(Mayor currencies are: USD/JPY, EUR/USD, GBP/USD and USD/CHF)
The complimentary FREE live charting software, with the ultimate
cutting edge technology provided by http://www.fenixcapit
almanagement.com/ , will be absolutely sufficient for you to
analyze and watch any one currency pair. Understanding just a
few basic points about the technical analysis of currency chart
can lead to increased profit potential.
Pricing - Price reflects the perceptions and action taken by the
market participants. It is the dealing between buyers and
sellers in the Over-The-Counter (OTC) or "interbank" market that
creates price movement. Therefore, all fundamental factors are
quickly discounted in price. By studying the price charts, you
are indirectly seeing the fundamental and market psychology all
at once , after all the market is fed by two emotions - Greed
and Fear - and once you understand that, then you begin to
understand the psychology of the market and how it relates to
the chart patterns.
Data Window Chart - FCM and most online charting stations, when
you click on a price bar or candlestick, it will display a small
box of data usually called a display window which will contain
the following items:
H = Highest Price L = Lowest Price O = Opening Price C = Close
Price (or Last Price)
The most common types of price bars, used in FOREX trading, are
the Bar Chart and the Candlestick chart:
Bars Charts -
Price bars are a linear representation (a line) of a period of
time. This enables the viewer to see a graphic representation
summarizing the activity of a specific time frame. As an
example, I use 10 minutes, 60 minutes and daily time interval
for my systems. Each bar has similar characteristics and tells
the viewer several important pieces of information.
First, the highest point of the bar represents the highest price
that was achieved during that time period. The lowest point of
the bar represents the lowest price during the same period.
Regular bars display a small dot on the left side of the bar
which represents the opening price of the period and the small
dot on the right side represents the closing price of the
period.
Candlesticks - Japanese Candlesticks, or simply Candlesticks as
they are now known, are used to represent the same information
as Price bars. The only difference is that the difference
between the open and close form the body of a box which is
displayed with a color inside. A red color means that the close
was lower than the open, and the blue color represents that the
close was higher than the open.
If the box has a line going up from the box it represents the
high and is called the wick. If the box has a line going down
from the box, it represents the low and is called the tail.
Many interpretations can be made from these "candlesticks" and
many books have been written on the art of interpreting these
bars.
Chart Intervals & Time Frames:
A chart Time Scale & Period, or time frame, basically refers to
the duration of time that passes between the OPEN and the CLOSE
of a bar or candlestick.
For instance, with your broker software, you will be able to
view a currency pair, in a 1-hour time frame over a 2-day
period, 5-day period, 10-day period, 20-day period and 30- day
period.
Most of the short-term time intervals (5-min and 1-min charts)
are used for entry and exit points and the longer- term time
intervals (1-hour and daily charts) are used to see where the
general trend is.
About the author:
Veteran Trader Martin Maier is the Founder of Fenix Capital
Management, LLC He is the developer of various futures and
commodities trading programs and his systems have been ranked
and rated by various large American Investment Profile Ratin
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