How To Read Forex Charts Richtig

wiki How to Read Forex Charts With todays sophisticated financial market operating worldwide, world currencies now have their own distinct sets of resources for measuring their worth over time. The general Forex, or foreign exchange market, helps to promote the comparison of different world currencies against each other, and against other assets, to help individual traders and investors take advantage of conditional values for those currencies. One resource is in the form of currency charts that provide a visual demonstration of the worth of a currency against other assets. If you need to read currency charts in order to get a better idea of currency values, here are some of the basic steps involved in utilizing these financial tools. Steps Edit Method One of Two: Learning the Basics Edit Get access to up-to-date currency chart information. In order to read and benefit from currency charts, youll need to get them from a legitimate provider. Most of the smaller traders and investors who profit from currency trading use charts that are offered directly from their brokerage services. New online brokerage services often include tools, like currency charts, in order to help their clients understand current pricing. Select a time frame for your currency chart. One of the most important steps in using currency charts, or any other kind of financial chart, is to set a specific time frame. The values that you view are only relevant to the specific time frames that you establish for them. With a paper chart, you can crop the chart for your specified time frame, where online tools often enable the user to change the view to a specific time frame, for example, 1 day, 5 days, 1 month, 3 months, 6 months or 1 year. Observe your currency chart for the desired time frame. You will see a line graph that represents changes and fluctuations in currency value over that period of time. Look at your line graph against your Y axis. The Y axis, or horizontal axis, for a currency chart most often indicates a comparative asset price. When a line fluctuates, it shows how your selected currency performs against the currency or asset that is represented in the Y axis. Check your X axis. The X axis for your currency chart represents your time frame. You will see that both of these axes have scaled, segmented values, where your line graph fluctuates in a variable way. Look for specific chart structures. Advanced traders and others look for specific visuals in a currency chart to try to predict which way future prices will go. Understand candlestick charting to take advantage of this advanced financial resource. Candlestick charts show a range of traits for a specific trading day, with a top and bottom that illustrate price movement. Many currency charts include candlestick charting, especially online ones, and by observing these charts correctly, you can know much more about the price than just how it has changed over a period of time. Look for items like Fibonacci retracement. A Fibonacci retracement is a specific kind of price spike or dip where a reversal can signify a general trend. Read up on this sort of predictive tool and apply it to your currency chart observation. Look for movement against moving averages. Moving averages tell you how the price has changed over a longer time frame. These may be helpful when you are viewing your currency chart. How to Create a Chart Trading Stations charts are easy to access and simple to navigate. In this video, we should you how to get the charts you need. To create a chart, click on this button at the top of the platform. Select the currency pair, the time period, which tells you how much data is represented by each point on the chart, and the desired time range. Selecting Open within the Trading Station will open the chart in a new tab within the platform. Unchecking the box will open the chart in a separate window, giving you more area to work in. Educational Videos: All videos are provided for educational purposes only and clients should not rely on the content or policies as they may differ with regards to the entity that you are trading with. Further, any opinions, analyses, prices, or other information contained on this website is provided for educational purposes, and does not constitute investment advice. FXCM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Related MediaHow to Read Forex Charts. The Ultimate Guide for Beginners Fundamental, technical, quantitative. There are a number of methods used by forex traders to predict the movements of currency pairs. Some traders focus on news, interest rates and economic variables while others prefer to use charting tools and indicators to guide their trading decisions. Table of Contents However, no matter your trading method, youll need to know how to read a forex chart - theres no escaping it. Luckily, we created this detailed guide to help you get started. You must crawl before you can walk. And forex charting is no different you first need to have a good understanding of the basics, before you can progress to advanced stuff. Lets get started. What is Forex Forex is short for foreign exchange the game of buying and selling various currencies in the foreign exchange market. In the global foreign exchange market, retailers, investors, speculators and institutions determine the relative value for the conversion of one currency to another via the buying a selling of currency pairs . Its a dynamic, liquid marketplace with daily turnover predicted to be in excess of 5.3 trillion dollars. How to Read a Currency Quote Forex is the business of conversion, and since you are always comparing the value of one currency to another, forex is always quoted in pairs. For example, the quote of EURUSD shows how many US dollars you will get for one Euro. The first currency is called the base the second is called the quote . When you buy a currency pair, you buy the base currency, and sell the quote currency. Simple. What is a Pip The most popular piece of terminology used by forex traders has got to be the humble pip . A pip is simply a unit you count profit or loss in. Typically, forex pairs are quoted to four decimal places (0.0001). The 1, four spaces after the 0, is what is referred to as a pip. The number 7 in red shows the decimal unit of a pip. If a trader buys GBPUSD for 1.6000 and then later on sells it for 1.6020, thats a difference of 0.0020 or 20 pips. The exception to this is Yen pairs ( i. e. USDJPY ), which are only quoted to two decimal places. In this case the second spot after the 0 is referred to as a pip. Now that youre up to speed, lets move on to what you really came for, how to read a forex chart. What is a Forex Chart A forex chart is simply a graphical depiction of the exchange rate between to currencies. It shows how the exchange rate of currency pair has changed over time. For example, the chart above (Euro vs. U. S. Dollar ) shows how the exchange rate between Euros and US dollars has fluctuated over time. Forex charts can be plotted for variety of currency pairs, from major pairs like EURUSD and GBPUSD to minor pairs such as AUDCAD and NZDJPY. The choice is yours. How do Forex Chart Timeframes work The amount of time shown on the chart depends on the particular timeframe you select. By default, our forex charts are set to daily (1D) timeframes. What this means is that each point on the graph, whether it be a line, candle or bar represents the trading data for one day . If you were to change the timeframe to a 60 minute chart . each point on the chart would now represent 60 minutes worth of trading data. Example below: With most free forex charting tools you can choose to display timeframes from as low as 1 minute all the way up to one month. If get more advanced charting software, you can view lower timeframes. Types of Forex Charts Forex traders have developed several types of forex charts to help depict trading data. The three main chart types are line, bar, and candlesticks. For forex traders, candlestick charts seem to be the crowd favourite, and its easy to see why. Compared to a line chart, which shows the price close to close, candlestick charts show four times the amount of information, displaying the close, open, low and high price of a given period. Diagram showing the Open, Close, Low and High prices of a candlestick. By having this extra information, you can study how price has moved over a period of time compared to just seeing where the price closed. The red and green portions of a candle are termed the body. The body of a candlestick represents the difference between the opening and closing price of the currency for a given time period. If the opening price of the candle is lower than the closing price, the candle body color is green. If the opposite occurs, and the opening price is higher than the closing price then the candle body color is red. The black lines above and below the candles are called wicks or shadows. Wicks represent the highest and lowest prices reached during the given time period. An Overview of Forex Indicators Currency charts help traders evaluate market behaviour, and help them determine where the currency will be in the future. To help make sense of the currency movements depicted on a chart, traders have developed a number of different visual guides to assist them indicators. There are hundreds of different types of trading indicators developed to cover every aspect of forex trading, from trend following to mean reversion. Below we cover some of the most popular indicators used by currency traders. Bollinger Bands Bollinger Bands are volatility bands placed x standard deviations around a moving average. Developed by John Bollinger. the bands widen in periods of increasing volatility and narrow when volatility decreases. Forex chart with the Bollinger Band indicator applied. From a traditional perspective, the bands are used to highlight potential oversold and overbought areas. For example, if a price move breaches the upper band, it might be expected that the price would then revert back to its mean, or in this case the middle moving average. Middle Moving Average 20 period simple moving average (20 SMA). Upper Band 20 SMA plus the 20 period standard deviation multiplied by 2. Lower Band 20 SMA minus the 20 period standard deviation multiplied by 2. Relative Strength Index (RSI) Developed by J. Welles Wilder the Relative Strength Index (RSI) is a momentum oscillator which measures the direction and velocity of price movements. Currency chart showing RSI oscillator. The indicator compares upward price movements in the closing price to downward movements in the closing price over certain time periods. The default period, suggested by Wilder, is 14 periods. RSI 100 100 (1 RS) Where RS equals Average Gain divided by Average Loss Average Gain (Sum of gains over previous 14 periods 14) 13 current gain 14 Average Loss (Sum of losses over previous 14 periods 14) 13 current loss 14 Simple Moving Average Line SMA or simple moving average is the most common indicator plotted on forex charts. Forex Chart showing simple moving averages. Moving averages are used as they help smooth price fluctuations over a certain period, giving the trader a clearer picture of the direction of the price movement. SMA Sum of the closing prices number of periods. You might also like. Written by Daniel Adams, content editor at MFXC. Last updated on July 16, 2016 myforexchartHow To Read Forex Charts: 5 Things You Must Know Learning the basic skills in Forex, such as how to read Forex charts, is really important. This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual Forex trading system . By the time you finish this article, you39ll learn how to read Forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven39t traded Forex before. Firstly, let39s revise the basics of a Forex trading as this relates directly to how to reade Forex charts. Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars. And your trade size (face value) is the amount of base currency that you39re trading. In this example, if you want to buy 100 000 EURUSD, you39re buying 100 000 EUROs. Now let39s have a look at the 5 important steps on how to read a Forex chart: 1. If you buy the currency pair, that is, you39re long the position, realise that you39re looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency. On the other hand if you sell the currency pair to short the position, then you39re looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency. Pretty simple so far. 2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry. So ensure that the chart you39re looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you39re trading, and to save and reuse this layout. 3. On most Forex charts, it is the BID price rather than the ask price that39s displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices. If you use the chart price to determine an entry or exit, realise that when you place an order to sell when the chart price is say 1.330, then this is the price that you39ll sell at assuming no slippage. If on the other hand, you place an order to buy when the chart price is the same price, then you39ll actually buy at 1.3333. A Forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling. Also note that on many platforms, when you39re placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either quotstop if bidquot or quotstop if offeredquot. 4. Realise that the times shown on the bottom of Forex charts are set to the particular time zone that the Forex provider39s charts are set to, be it GMT, New York time, or other time zones. It39s handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you39re trading major economic announcements. You39ll need to convert the time of an announcement to your local time, and the chart time, so you39ll know when the announcement is going to happen, and therefore when you need to trade. 5. Finally, check whether the times on your Forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else39s in this way. The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards So there you have it. You now have the 5 essential keys to how to properly read Forex charts, which will help you to avoid the common mistakes which many Forex beginners make when looking at charts, and which will speed up your progress when you39re looking at Forex charting packages, and Forex trading systems that you want to trade Now that you know this, practice looking at Forex charts with each of these 5 points in mind. by Mark Hamburg