Currency traders have come up with several methods of trying to figure out the direction of a particular currency pair. The fundamental traders depend on news sources such as CNBC to determine how economic growth reports, interest rates, political risk, inflation, and employment rates affect the demand and supply for currencies.
The technical traders who operate at XFR Financial Limited will use charting tools as well as indicators to identify trends in the market along with important price points that offer the best entries and exits into and out of the market.
However, regardless of the type of trader you are, you will have to learn how to read forex charts.
Opening A Price Chart
This process will vary slightly from one trading platform to the next but the operation is just about the same. The first thing is to choose the currency pair of choice followed by the period.
The period is simply the time interval that the chart updates. For instance, a period set to one hour (H1) means that every point on the chart represents one trading hour of data. Similarly, a period set to fifteen minutes (M15) means that every point on the chart represents 15 minutes of data and so on.
Using Candlestick Forex Charts
In most trading platforms, just like the one XFR Financial Limited has, the default chart type is the ‘candlestick’ chart. This is the most commonly used chart type in the currency market. A bar on this type of chart shows the open, close, low, and high prices for the chosen period. The candlestick’s body shows the opening and closing prices while the wicks show the low and high prices.
Depending on the setup you have, if you have a higher closing price than that of the previous candlestick, then the candlestick will be green or full. If the closing price is lower than the opening price of the previous candle then the candlestick will be red or hollow.
However, you can change the appearance of all these by simply editing the settings on your chosen trading platform. The role of the candlesticks is to provide a visual representation of whether in the selected trading period, the price closed higher or lower.
Looking at the plain forex charts can help you when making a trading decision with XFR Financial Limited. However, many traders also love to use technical indicators to help make better trading decisions.
These tools are great for helping traders determine price trends and predict future price movements. Most trading platforms come loaded with various indicators and all you have to do is add them to the forex charts.
XFR Financial Limited – Drawing A Trend Line
In the currency market, prices trend in 3 different ways, up, down, or sideways. An upward trend represents a bull market, a downward trend represents a bear market, while a sideways trending market represents a range bound market.
Trend lines are great for helping traders determine market direction in a visual manner. When drawing a trend line, you ideally want to connect two extremes in price that define the trend.
In conclusion, XFR Financial Limited has provided a brief overview of how you should read forex charts. This is obviously a highly simplified version of how to read the charts but it should provide a nice starting point.