HOW TO READ FOREX CHARTS

Get acquainted with 3 most popular charts you will encounter in forex.

1. Line chart
2. Bar chart
3. Japanese Candle sticks chart

To better understand charts, get acquainted with price symbolic movers. While most people are familiar with Wall Street's raging bull symbolizing aggressive financial optimism and prosperity, few understand the bear representing pessimism and declining markets.

BULL

A bullish or bull market that shows confidence and stability. typically employment is high and the economy is strong, convincing brokers and investors of an upward market trend. The trend continues from bull fights when an opponent is thrown up into the air with the bull's horns.

When bull outweigh bears, indicator turn to the color green, representing a  larger demand for currency and  thus increasing its value.

So when you spot a bullish market, you want to buy currencies for less and sell for a higher currency price.

BEAR

On the other side of the spectrum is a bearish or bear market. This declining market creates insecurities among brokers and investors who expect trends to go downward. The term is used to signify that the market behaves the same way as a bear in fight by pushing down to the ground. A bearish market is visualize in charts with color red.

When you feel confident that the bear will soon overtake the bull and expect currency rates to fall, you would sell short. this process may seem unclear to many people, so let's break it down. The simplified idea is that you borrow currency from your broker and when the currency price falls, you pay back the broker at the lower price, thus, making  profit on the difference. The process is completely automated . We recommend trying the sell - short option in our trading simulator to see exactly how it works.




LINE CHART

The line chart is the most basic chart type and is created by connecting several data points together with a line. The line chart can give you a good idea of how the currency price changes over a given time frame and allows  you to keep an accurate track record of historical closing prices.

BAR CHART

The bar chart is used in technical analysis to indicate the highest price a security traded at during the day as well as the lowest price at the top and the bottom of the vertical line respectively. the closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar

CANDLE STICK CHART

The candlestick chart resembles a lot to the bar chart, but the major difference is the relationship between the opening and the closing prices. Unlike the bar chart, the candlestick chart emphasizes more on the relationship between the closing price and the opening price of the same day  trading. 

Bearish - The price decreases
Bullish - The price increases

The dual nature of the financial market is portrayed in the bullish and bearish market.

Bullish (bull market) is the rising market that shows confidence and stability and convinces brokers and investors that the trend will be upward. The term is used to signify that the market fights like when the bull fight and throw their opponents up in the air with their horns.

Bearish (bear market) is the declining market that creates insecurity to brokers and investors who expects that the trend will be downward. the term used to signify that the market goes down like when the bears fight their opponents are being put down.

MULTIPLE TIME FRAME ANALYSIS

The market can be analyze in several time frames: minutes, hours, days, weeks, even months. It may seem that these indicators are contradictory, but they aren't. You just need to combine the readings. Analyses of longer time periods indicate particular trends, ignoring minor accidental changes, whereas daily and hourly charts are use for choosing the perfect timing to open and close a position.

Let's have a look at the daily chart above. what do most novice  do when they see such a curve? they assume that its the beginning of a downward trend and bid on the drop of the currency exchange rate. And They're wrong!

Now let's look at the same currency over a longer period oof time above. We see that the days shift was a short term fluctuation and  that the trend is bullish (upward) and not the other way around as one might consider by looking at a smaller time frame.

PROFESSIONAL TRADERS USE THE DAILY CHARTS TO SPOT TRENDS AND MINUTE CHARTS TO SET THE ENTRY & EXIT POINTS.

TRENDS

Charts help you understand the  overall direction a currency pair is going. The data points show either upward or downward trends, which helps you to decide when to buy or to sell.