Forex Price Charts, what do they mean and how to use them?
Important numerous facts as discipline, trading rules, not
being greedy etc., but one of the most important things is:
Learn to read the charts as Charts represent the lifeblood
of the market.
I admit that reading charts, and interpreting patterns, are
more an art than a skill. Base and apply your entry and exit
decisions on Your Own combined methods of technical and fundamental
analysis.
Forex charts, are easier to interpret and to use. They reflect
a slower moving, stable economy of a country, compared to
the stock market, with its daily drama of company reports,
Wall Street Analysts and shareholder demands.
Unlike stocks, currency charts do not spend much time in trading
ranges and have the tendency to develop strong trends. Furthermore,
Forex with its 4 Mayor currencies is easier to analyze than
tens of thousands of stocks.
(Mayor currencies are: USD/JPY, EUR/USD, GBP/USD and USD/CHF)
The complimentary free live charting software, with the ultimate
cutting edge technology provided by http://www.fenixcapitalmanagement.com/
, will be absolutely sufficient for you to analyze and watch
any one currency pair. Understanding just a few basic points about the technical
analysis of currency chart can lead to increased profit potential.
Pricing - Price reflects the perceptions and action taken
by the market participants. It is the dealing between buyers
and sellers in the Over-The-Counter (OTC) or “interbank”
market that creates price movement. Therefore, all fundamental
factors are quickly discounted in price. By studying the price
charts, you are indirectly seeing the fundamental and market psychology
all at once , after all the market is fed by two emotions
- Greed and Fear – and once you understand that, then
you begin to understand the psychology of the market and how
it relates to the chart patterns.
Data Window Chart – FCM and most online charting stations,
when you click on a price bar or candlestick, it will display
a small box of data usually called a display window which
will contain the following items:
H = Highest Price
L = Lowest Price
O = Opening Price
C = Close Price (or Last Price)
The most common types of price bars, used in Forex trading,
are the Bar Chart and the Candlestick chart:
Bars Charts -
Price bars are a linear representation (a line) of a period
of time. This enables the viewer to see a graphic representation
summarizing the activity of a specific time frame. As an
example, I use 10 minutes, 60 minutes and daily time interval
for my systems. Each bar has similar characteristics and
tells the viewer several important pieces of information.
First, the highest point of the bar represents the highest
price that was achieved during that time period. The lowest
point of the bar represents the lowest price during the
same period. Regular bars display a small dot on the left
side of the bar which represents the opening price of the
period and the small dot on the right side represents the closing price
of the period.
Candlesticks -
Japanese Candlesticks, or simply Candlesticks as they are
now known, are used to represent the same information as
Price bars. The only difference is that the difference between
the open and close form the body of a box which is displayed
with a color inside. A red color means that the close was
lower than the open, and the blue color represents that
the close was higher than the open.
If the box has a line going up from the box it represents
the high and is called the wick. If the box has a line going
down from the box, it represents the low and is called the
tail.
Many interpretations can be made from these "candlesticks"
and many books have been written on the art of interpreting
these bars.
Chart Intervals & Time Frames:
A chart Time Scale & Period, or time frame, basically
refers to the duration of time that passes between the Open
and the Close of a bar or candlestick.
For instance, with your broker software, you will be able
to view a currency pair, in a 1-hour time frame over a 2-day
period, 5-day period, 10-day period, 20-day period and 30-
day period.
Most of the short-term time intervals (5-min and 1-min charts)
are used for entry and exit points and the longer- term time
intervals (1-hour and daily charts) are used to see where
the general trend is.
Veteran Trader Martin Maier is the Founder of Fenix
Capital Management, LLC http://www.fenixcapitalmanagement.com
He is the developer of various futures and commodities trading
programs and his systems have been ranked and rated by various
large American Investment Profile Ratin
