It is difficult to imagine how a forex trader would be able to trade without price charts. Even the best forex broker will tell you that forex price charts are the most fundamental tools for performing all sorts of market analysis on the movement of forex pairs. A trader uses these to view currency rate historical data, as well as to make forecasts on future price movements.
What are the Benefits of Price Charts?
There are several types of price charts that can be used for all kinds of trading styles. Some of the benefits that can be obtained from using these charts are the following
- Forex price charts aid in the real-time visualization of the global currency exchange market environment.
- Forex price charts can help identify patterns and market behaviors.
- Forex price charts are basic tools for performing technical and fundamental analysis of the forex market. Charts are used by technical analysts by focusing on the actual event occurrence and the known patterns of the movement of prices. Meanwhile, fundamental analysts analyze visible price trends on the forex charts and study their correlation to macro events, such as political events and changes in economic policy.
What are the Different Types of Forex Charts?
Here are the most commonly used forex charts:
This is perhaps the most basic type of chart. Line charts are based on market closing exchange rates for every trade period and provide the most ideal method to easily chart currency price resistance and support levels.
This type of chart is detailed and provides at least three different rates for each instant, including the price highs, closing rates, and price lows. There are some bar charts which also provide the opening rates.
Among the different types of price charts, the candlestick chart is probably the most popular one. It provides a comprehensively detailed snapshot of the forex market in a way that is easy to read, and displays the opening rates, closing rates, highs, and lows for each point in time.
Transparent candles correspond to an increase, while the dark candles symbolize a decline. The length of the candle wicks and tails, as well as the length of the body represent the full price range for each specific time period.
Point and Figure Chart
This type of chart does not give a linear representation of time unlike other types of price charts. However, it is based on currency prices like most.
If you want to succeed in trading in the forex market, it is highly recommended that you learn how to use these price charts in predicting price movements. Always keep in mind that these are your best weapons in making wise decisions about when to buy or sell.