Have you ever looked at a forex chart and felt like you were staring at an archeological graph?
Don’t worry. You’re not alone.
The complex graphs and patterns can seem intimidating and overwhelming for those new to forex trading.
However, understanding how to read forex charts is essential to become a successful trader. In this article, we’ll take you through the steps of how to read forex charts like a pro, from the basics to more advanced techniques.
The multiple types of forex charts
In becoming a pro chart reader, the first step you need to take is to learn about the types of forex charts.
Three main types of forex charts; candlestick, line, and bar.
The candlestick chart is the most popular type of forex chart. Each candlestick represents the trading range between a currency pair’s high and low prices over a specified period.
The candlestick’s body is colored differently depending on whether the closing price is higher or lower than the opening price.
The line chart is the simplest type of forex chart. It plots a single line that connects closing prices over a period. While it may lack detail, it’s a great way to get a quick overview of the general trend of a currency pair.
A bar chart displays a vertical line representing the trading range between a currency pair’s high and low prices over a specified period. The top line represents the highest price, while the bottom represents the lowest.
How to interpret forex charts?
When analyzing forex charts, you need to remember the lingo of technical analysis. It involves studying past market data to identify trends and patterns indicating future price movements.
Various tools and indicators are used in technical analysis, including moving averages, trend lines, and oscillators like the Relative Strength Index (RSI) and Stochastic Oscillator.
Each chart type also has different types of analysis. For example, candlestick charts are useful for identifying patterns like dojis, hammers, and shooting stars.
There are also chart patterns like rising and falling wedges, triangles, head and shoulders, and others. These patterns indicate if the trend is likely to continue or reverse.
Pro tips for reading forex charts
Now that we’ve covered the basics of reading forex charts and the different approaches to analysis, let’s dive into some tips for reading forex charts like a pro:
- Don’t clutter your charts with too many indicators and lines. Start with a clean chart and add only the indicators that you find most useful.
- Before you use advanced analysis techniques, ensure you understand the basics of forex charts, including the different chart types and how to interpret them.
- Look for trends in your charts and use them to make informed trading decisions.
- There’s no substitute for practice when it comes to reading forex charts. Spend time analyzing charts and experimenting with different indicators and techniques.
Reading forex charts is a fundamental skill for any trader looking to succeed in the forex market. Remember, practice makes perfect.
So, take the time to analyze charts, experiment with different indicators and techniques, and hone your skills until you can read forex charts like a pro.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.