Essential things you should know about the trading charts
In the Forex market, charts are being analyzed using smart tools and advanced indicators. Every investor, regardless of their experience level, uses various sophisticated tools to analyze the current market condition. To study the course of a currency pair’s rate, everyone needs to look into its present and historical price movement.
A chart, which shows the price movement, is the first factor that technical analysts need to learn about. In this article, we will venture deeper into different kinds of this, which are mandatory to be understood by the Forex traders.
Different Forex Market Analyzing Charts
In its most basic form, this is nothing but a visual representation, or you can say a depiction of a course or path of a pair’s rate. It shows all the trading activities that happened during a specific trading period. Any type of economic asset with price information over a particular period can be deployed to construct a graph for inspection.
Rate changing in the Forex market is mostly and a highly random event. So, one of the essential responsibilities of all the market participants is to manage the risk level the market throws at them. Assessing the probabilities of imminent market conditions is vital in such cases. That’s where charts and graphs come into the picture. As a new trader, try to choose the best broker in the CFD trading industry so that you can get access to professional trading platforms like SaxoTrader.
Professional trading platforms are highly user-friendly, and since they are well equipped with most of the advanced tools, they elegantly show a trader a pair’s patterns, movements, and tendencies. A vertical axis reflects the price scale in such a graph, and the horizontal axis depicts the time scale. Once there was a time when people drew it by hand. However, nowadays, all that can be done using a computer.
What Does A Chart Reflect?
At its core, a price chart draws shifts in the demand and supply. At any given moment, it collects all the transactions of a financial instrument. Other than that, it implements all types of news and people’s expectation of imminent news. When the future eventually arrives, and the situation deviates far from trades expectations, the process moves again.
What was once the future news, become the critical data after the release. By using this data, people revise their expectations for the future news. Thus, the cycle goes on.
Types of Charts
These three are the most popular when it comes to Forex,
- Bar, and
- Candlestick chart
Let’s know a bit about all of them.
1. Line Chart
It depicts a stroke between two successive closing rates. When both closing rates are strung with a straight stroke, traders can see the typical price course of a pair over a specific period.
These types of graphs are very easy to follow as they only focus on the market course and don’t make things complicated.
2. Bar Chart
Bars show both the closing and the opening prices and also the lows and highs. They allow a market participant to see the range of the price for every period.
The top of a bar indicates the highest-paid rate of the buyers and the bottom of a vertical bar shows the lowest paid price. The vertical bar reflects the trading range of a currency pair as a whole.
When market volatility reduces, the bars shrink. On the other hand, when the volatility rises, they become larger.
3. Candlestick Chart
This is another type of bar. Candlesticks depict the same information of the market as a typical bar that, though they are more visually pleasing and prettier.
They indicate the low and high ranges with a vertical stroke. However, in this charting system, a larger body block in the middle indicates the opening and closing rates and the range between them.
As a full-time trader, you should study these critical factors very precisely. Knowing only one of them will never work as you will fail to analyze the data properly. The learning stage might be a bit challenging but with proper devotion, you can master the professional which are integral to trading.