How to Read a Chart

Forex traders have developed several methods to determine which direction a currency pair will continue.Fundamental traders read news resources DailyFX.com for interest rates, economic growth, unemployment, inflation and political risks that affect supply and demand of currencies. Technical traders use charting tools and indicators to identify trends and the importance of price levels to see where to enter and exit the market. 

No matter what kind of trader you are, you need to know how to read a chart ....

OPENING A PRICE CHART

To begin, click on the tab "Graphics" at the top of the Trading Station II platform, and then select "Create a market view." Finally, you need to choose the currency pair, the period and specify the data range.

The period is the time interval that is updated in the chart. For example, the period can be one day (D1), which means that each point on the graph represents data of a trading day. When placed five minutes (m5) it means that the graph represents data of five minutes. The data range refers to the history that is visible on the graph. You can select the one-year option if you want to see the data of the last year.

USING CANDLESTICK CHART

The default chart type is called "graphic Candlestick". This chart type is the one mostly used in the Forex market. Candle bar shows the opening price, closing, maximum and minimum for a given period. The candle body shows the opening price and closing show fuses where the maximum and minimum.

If the closing price is higher than the opening price of the previous candle, then the candle will be blue. However, if the closing price is lower than the opening price of the previous candle, then the candle will be red. Candles provide just see if the period ended trading up or down. 

ADDING AN INDICATOR

Only look at the graph can facilitate the decision making, but also many traders use indicators that help them make more informed trading decisions. These tools can help the trader find trends and predict future price movements. The Trading Station is equipped with more than thirty indicators already downloaded. More than six hundred popular custom indicators and can be downloaded online. To add an indicator to the chart, right-click the chart and select "add a flag."

DRAWING A TRENDLINE

The prices tend to move in three ways: to increase (bull market), down (bear market) or laterally (market range).Trend lines are used to visually recognize the current trend. It is reasonable that the trader thinks the trend will be maintained until it is "broken". You can draw trend lines with the tool "pencil". Commonly two or more extreme price highs or lows are connected to define the trend and draw the line. Here are some examples.

BULLISH TREND

BEARISH TREND

HORIZONTAL TREND