How to Read the 5 Forex Charts: A Beginner’s Guide

how to read currency charts

This is a decentralized market that spans the globe and is considered the largest by trading volume and the most liquid worldwide. Exchange rates fluctuate continuously due to the ever changing market forces of supply and demand. Forex traders buy a currency pair if they think the exchange rate will rise and sell it if they think the opposite will happen. The Forex market remains open around the world for 24 hours a day with the exception of weekends. Small bars mean consolidating markets, similar to the Dojis local to candlestick charts. Color coding the price bars depending on whether the price moved up or down helps forex traders to see price movements and trends more clearly.

In theory, a price shouldn’t go over the resistance line or below the support line—if it does, it won’t stay there for long, so be prepared to buy or sell should that happen. A long, green body could indicate that there was a lot of how to read currency charts buying pressure for that day, while a long, red body could indicate significant selling pressure. More often than not, when there’s a strong push in one direction, the price is bound to swing in the opposite direction just as much.

The Time Periods of a Bar Chart

If you are just learning forex trading, this list should give you a good overview of how to read primary forex charts. You will find that certain forex charts give you more useful information than others. One trader might achieve soaring success using a tick chart while another hates reading tick charts and makes good money using candlestick charts. Technical indicators are mathematical tools that help to put past and current price action into context so that traders can predict possible future price direction. These indicators also help one to learn when markets are ‘oversold’ or ‘overbought’ and if a reversal is imminent. There are numerous types of indicators, and they help traders to understand different types of price elements such as trend, momentum, volatility, volume, and market cycles. The second major chart is the bar chart, and as the name implies, it uses bars to show the opening and closing prices of a currency pair as well as the highs and lows.

how to read currency charts

If you want to trade forex, learning how to read forex charts is key to success. These charts reveal powerful clues about potential price changes and where the momentum is shifting. The quickest way to recognize a technical analyst gone awry is when you have a hard time finding the price in the chart. It’s often best to keep it simple and remember that the chart isn’t so much about telling the future as it is managing risk effectively.

What is a Forex Chart?

Forex traders have developed several types of forex charts to help depict trading data. After selecting a currency pair, set the specific time period you want to examine.

For this reason, many forex traders only use line charts when assessing long-term trends, where some of the additional information may not be quite as relevant as it is when trading short-term patterns. There are different kinds of charts that help as tools for technical analysis. These charts represent the price movements of currencies over a certain period preceding exchange deals, as well as technical indicators. The technical indicators are obtained through mathematical processing of averaged and other characteristics of price movements. The best way to get comfortable with using candlesticks in your trading is to open a demo account and start practicing applying your knowledge. As soon as you get comfortable enough in reading candlestick charts for trading, you can open a live account and use your experience to improve your trading performance in the long run.

What Does a Forex Chart Show? 💹

We use the information you provide to contact you about your membership with us and to provide you with relevant content. The team at How To Trade is here to answer any questions that you may have – big or small. Asking the right questions is the first step in taking your trading performance to the next level. Thus, an oddball bar that is different in size or component configuration from the bar preceding it should get attention.

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