Use a Forex chart as your secret weapon
Learning how to use a forex chart will greatly improve your ability to become a profitable online forex trader. As with stock investing, there are several popular chart types used to visually analyze trading data. Some of the types of forex charts include bar charts, candlestick charts, and point and figure charts.
The forex chart can be very useful when looking to analyze markets when using technical analysis. The technical style of trading ignores fundamental factors and is only used with the price action of a market. This can be good to also remove the emotional effect trading has on your state of mind.
With a forex chart, you can see the movement of the market in a visual format. In addition to the standard chart, you can add indicators or oscillators to help you make decisions about when to enter or exit your forex trades.
In case you don’t know what an indicator is, it is a series of data points that are used to help predict currency movements. Some of the most popular indicators used in forex charts are moving averages, waves, and Bollinger bands.
Bar Charts – These are used quite often in technical analysis of the stock market. Bar charts are quite easy to build, which makes them quite popular. Charts are constructed by displaying intraday, daily, weekly, or monthly movement as a vertical bar. The open and close prices are shown by horizontal marks to the left and right of the vertical bar, respectively.
Candlestick charts: They were the secret weapon of Japanese traders until Merrill Lynch’s Steven Nison popularized the use of this chart in Western markets. The candlestick chart is attributed to Munehisa Homma, an early 18th century Japanese rice merchant.
The candlestick is the graphical representation of the price bar: the opening, maximum, minimum and closing price of the period. The candlestick has become a widely used tool in online currency trading.
When you use the candlestick on your forex chart, there are many patterns that you can learn to identify to help you with your technical analysis. There are 12 you really should learn. Some of them include morning star, evening star, shooting star.
When using forex charts you must use live data sources. This means that the data you are seeing on your currency charts is based on the actual exchange rates at the time you are viewing the chart.
To get your data and software for your forex charts you have free options and paid options. Very often after selecting your forex broker you will receive some forex charts through your trading platform.
With paid options, you would normally pay for a data feed to build your forex charts. This is usually a monthly subscription. Very often you can receive a free trial before committing to a subscription.
I currently use FXCM Trading Station and it comes with a built-in forex chart. You can ask your broker what he recommends if you want more advanced forex charting options.
If you are considering getting into the forex market and trading currencies, I recommend that you learn what you can about using a forex chart to help you with your trading.
If you find all of this too difficult, you may want to use a Forex signal service, however this comes at a cost. It is always better to trust your knowledge of forex charts.