FOREX Chart
The tool of technical analysis - the FOREX chart.
If you practice technical analysis you already know the value of a FOREX chart, if not you may want to take a closer look at price charts. The technical analysis field is base on the study of price data. Traders have seen that history tends to repeat itself and by studying price charts there are often signs in the prices today that the technical analyst uses to predict future price movement. The technical analysis field is very popular among traders because it is a little easier to grasp than the field of fundamental analysis where a trader studies economic conditions and the political atmosphere in order to predict future price action. At one time in a trader’s career they will perform technical analysis of charts – almost guaranteed.
The most popular type of chart of currency pair showing the opening, closing, high, and low for each time interval combined with a plot of the trade volume. However, this is not the only type of chart that you will ever see, there are candlestick charts, point and figure charts, and three line break charts just to name a few.
As we have said, FOREX charts may be one of the most important tools for the trader. Why is this? To show you how an experienced trader can utilize a FOREX chart in their trading endeavors, we will discuss a few of the more important aspects of chart analysis:
Identifying trends – As all traders know or will come to find out always trade with the trend and not against it. The chart can be used to quickly identify trends, both major and minor. The overall price direction covered by a long-term chart will be the major trend. The major trend will be comprised of several minor trends in both directions. All of these can be readily identified on a chart.
Support and resistance levels – Support and resistance levels, when broken, could identify a reversal in a trend. A line drawn through the high points in a down trend signifies a resistance level and a line drawn through a up trend’s low points will form a support level. When prices approach these levels and pull back or when they break through these levels these could be trading opportunities.
Chart Patterns – If you should practice technical analysis in the course of your trading you will become familiar with several chart patterns. If you take any kind of FOREX Training some of your time will be spent discussing the more popular chart patterns. Most of the popular chart patterns will be used to signal a change in the current trend or a continuation of the current trend. Being able to recognize these patterns will give you a leg up on those traders who are not able to take advantage of these signals. Some of the more popular chart patterns and what they usually signal are as follows:
- Head and Shoulders – a trend reversal pattern.
- Ascending Triangle – a trend continuation pattern.
- Double and Triple Tops and Bottoms – trend reversal patterns.
- Flags and Pennants – trend continuation patterns.
- Cup and Handles – trend reversal patterns.
- Wedge – trend continuation pattern.
These are just a few of the more popular chart patterns being used by today’s traders. There are many other uses for price charts that we have not discussed such as moving averages and Oscillators. The FOREX chart is just one of many tools that a successful trader uses on a daily basis.