Forex charts enable a trader to conduct technical analysis as well as fundamental analysis on currency pairs, and can be extremely beneficial for a chartist. There is no specific charting software that provides the best opportunities for Forex traders, since each trader has their own style.
Benefits of Trading with Forex Charts
There are several types of charts that are available; they help visualize the foreign exchange market environment, provide for better forecasting and identify the Forex market’s behavior and patterns.
Forex charts are helpful for both technical as well as fundamental analysis. The technical analyst focuses on the actual occurrence of events with known patterns, whereas the fundamental analyst tries to analyze any correlation between trends visible on the chart and macro events, such as political and other events.
How do the charts work?
To trade technicals from a chart, some key points should be kept in mind, such as:
an understanding of the support and resistance levels, and Indicators that need to be lined up to show whether a level would either hold or break. Considering these, one can formulate a Forex trading strategy in a short span of time.
If one wants to gain more in the field of Forex chart techniques, it is advisable to join a service that provides charts through the internet and assist in reading as well as analyzing other chart information.
Forex Chart Types
Line Charts – The simplest form of charts, based on the closing rates at each time unit, which result in the formation of a homogeneous line. This type of chart provides the best way to chart the resistance and support levels.
Point and Figure Charts – These charts are based on price and do not provide a linear representation of time.
Bar Charts – These charts include three separate rates at each point in time, the high, the low and the closing rate. There are also bar charts that include the opening rate for a specific period.
Candlestick Charts – These charts exhibit prices at their opening, closing, highs and lows, in the form of candles for each time period selected. The dark candles mark a decline, while the empty/transparent candles show an increase. The entire candle represents the full range at each time period.
One important thing to remember while using Forex charts is that a trader should try to avoid predictions based on only these charts. However, understanding chart trading and their application is important for the Forex trader looking to make a profit.
Learn more about technical charts at easyMarkets.