A Forex chart refers to the visualization of the ask and bid price movements of currency pairs. The price movements are expressed in various time frames like minutes, hours, months, days, and years. Forex charts look different based on which option you choose. Generally, trading charts have settings for displaying the price of currency pairs and the time you wish to view. The time frame of a trading chart can be between 1 second and ten years. The price in a Forex chart can be shown as a bar, line, or candlestick.
Types of Charts
Nearly every good forex brokers offers Forex charts to clients with their trading packages. Other than brokers, many third-party chart programs also offer these charts for free. Let us discuss the most popular Forex charts today:
*Candlestick chart: A candlestick chart refers to the most famous way of visualizing the price movements of currency pairs at a given time. A candlestick chart displays four prices simultaneously in a long time frame. Individual bars are set in a specific time frame in this chart. These bars show the high/low and opening/closing prices of currency pairs.
*Bar chart: A bar chart is pretty complex. It represents four prices of a given currency pair at a specific time frame – either second, minutes, hours, or days. The top end and bottom end of the bars signify the highest price and the lowest asset’s price within a given time frame. The left side vertical line displays the opening price. The right side vertical line denotes the closing price.
*Line chart: A line chart is the simplest and the most basic price representation in Forex. It shows different prices of a specific asset and links the neighboring points using a continuous line. Line charts show the closing prices of a currency pair only.
Forex Trading Chart Indicators
Forex chart indicators play an essential role in Forex trading. Every trader and investor should know them. So, below is a comprehensive list of the top Forex trading chart indicators:
Bollinger Bands: Bollinger bands help measure the volatility of the market. Moving averages are the most vital element in Bollinger Bands. This indicator is simple to use and offers a dependable trading entry. The upper line and lower line work as dynamic support and resistance level in the Bollinger bands.
Relative Strength Index: RSI is used to recognize market conditions, warning signals, and momentum for hazardous price movements. RSI falls between 0 to 100. This indicator shows where the price movement will reverse. If the price in a downtrend goes below 30, it displays a bullish reversal of the market. While if the price goes above 70 in an uptrend, it shows a bearish reversal of the market.
Moving Averages: Moving average is a concept that all Forex traders should know. Multinational companies and central banks drive the foreign exchange market. Moving average refers to the average rate of the last candles that signify the overall price sentiment. If a price is going above this moving average, it indicates that the price is controlled by the buyers. But if a price is below this moving average, it denotes that sellers are controlling the price. To make successful trades, buy trades when the price goes above moving averages.
Stochastic: This is a famous momentum indicator that aims to recognize the oversold and overbought zone. Traders need to find out possible profits-making areas. To do this, they use the MT4 to determine the place from where prices will reverse. This indicator moves from 0 to 100 level. If the price goes above 70, the price is likely to reverse. And if the price goes below 30, there will be a bullish reversal.
MACD: This indicator includes an exponential moving and a histogram average. MACD aims to help calculate divergence with the rate. A regular divergence with the price and MACD signifies a market reversal. Their hidden divergence refers to a market continuation.
Parabolic SAR: This indicator indicates the trends of currency pairs. If the price of a currency pair goes above this indicator, there is a bullish trend. While if the price goes below the SAR, there is a bearish trend.
Why Do You Need Forex Trading Charts?
Forex trading charts are widely used by traders and investors for technical analysis. Traders use these charts to view the historical movements in prices and make specific conclusions. In Forex, technical analysis is a way of reading trading charts and speculating. It lets traders find whether a Forex pair price will decrease or increase in the future. Let us have a look at the main benefits of technical analysis:
Entry/ Exit Points: When it comes to trading, timing plays a vital role. With the trading charts, investors and traders can find the right time for entering/exiting a trade. Chart patterns and candlestick charts are helpful to determine the right entry point and exit point.
Trend Analysis: Another benefit of Forex trading charts is that they help traders find the market trends. Sideways, upward, and downward market moves are simple to predict using trading charts.
Offers Early Signals: Charts provide early signals and pictures of traders’ psychology about what they are carrying out. With price-volume analysis using charts, traders can determine the market makers’ movements and their activities.
Offer Lots of Information: Forex trading charts are helpful for swing trading, long-term investing, and short-term trading. They offer lots of information that assists traders in making trades and build their position.
Forex trading charts play an essential role in the success of traders and investors. There are many opportunities for traders and investors who know about the Forex trading charts. Once you find your preferred chart, search for the right balance of getting enough information on these charts to make the right trading decisions.