The importance of reading charts in Forex trading.
Forex trading is incomplete without knowing about forex chart. A Forex chart is one thing that holds the reins of the foreign exchange market. It is the omniscient source of information about the changing currency rates. However, one needs to have complete concentration while reading a chart since the decision that you make is truly governed by the values that you read on the chart.
Forex trading cannot be done without a thorough analysis of the trend that can be determined through the chart. A Forex chart may assume different appearances for different people depending upon the choice that you make for the time and currency display. The time can range from 1 minute to around 1 month. The Forex rates can be displayed in the form of a candlestick, a line or a bar chart. The composition of each is as follows:
Candlestick chart: The concept evolved from the Japanese candlestick. It turns blue when the price is increasing and it is heading up and red when the price is decreasing and it is moving down. There are two wicks at the end of the candlestick which represent the opening and closing price of the transaction.
Bar Chart: The prices are represented as individual bars and you can notice the changes in the currency rates and take your decision.
Line Charts: These charts in online trading can be explained with respect to the software, usually MetaTrader and is represented as a graphical analysis (usually of the form of ECG output). This analysis however, is specific to a currency pair.
The other thing regarding currency trading apart from the reading of charts is the concept of support and resistance. Support may define the lower bound and resistance may define the upper bound on the prices. The combined effort of these comprises the trading trend. A perfect blended situation of the support and resistance needs to be established in order to take profits.
The next most important part in Forex trading is the determination of moving averages. The most appropriate technical indicator that you can trust in the moving average. This helps to determine the trend in foreign exchange market and can contribute to settlement of profitable deals.
However, this moving average of Forex rates is also calculated in two ways depending on your requirement. One is the simple moving average just gives the basic information of the direction of the trend in the time period that you opt for. Other one is the weighted moving average that considers the recent price changes to be more beneficial than the previous ones.
The understanding of these simple concepts of Forex trading can contribute a lot to profitable dealing and better understanding of the factors to consider while finalizing the trade.
The most important points for a trader are as follow.
- The best way to understand the traders psychology – Is Candle Stick Chart
- We will suggest you not to invest your time in other chart pattern, until you get expertise in candle stick reading
- It may take bit more time, but once you get acquainted then that’s it. It will help you in long run.
- Have faith in your trading strategy “You will earn like nothing – You can write your own pay cheques”
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