How to read Forex charts? Charts for FX trading may seem intimidating at first glance, but that doesn't have to be the case. Many beginn...

How to read Forex charts?

Charts for FX trading may seem intimidating at first glance, but that doesn't have to be the case. Many beginners are intimidated by complicated-looking charts because they just don't know what to do with them, but we're determined to change that.

In this article, we will discuss how different charts can be understood, what each of the main components is, and what to pay attention to.

What are the different types of Forex charts?

The first step in having an FX strategy is to understand that there are three main types of charts: line charts, bar charts, and candlestick charts. Below we will detail each of the different types and give you an overview of the advantages and disadvantages of each. Each of the different types of Forex charts is unique in its own way and has its own reasons for being used.

line charts

A line chart is the simplest type of chart and is created by connecting a series of data points with a line. Line charts are often used to track price movements over time, but can also be used to track other data sets, such as volume or momentum. They look the same as any other type of line chart and you can probably read them if you are familiar with any other type of trading, be it crypto, stocks, or CFDs.

Advantages: Line charts are easy to understand and can be used to identify trends.

Disadvantages: Line charts do not provide as much information as other types of charts.

bar charts

Bar charts are similar to line charts, but instead of connecting the data points with a line, they use vertical bars. Bar charts can be used to track price movements over time, but can also be used to track other data sets such as volume or momentum. They're pretty easy to read once you know what you're looking for, but using them to predict trends can be trickier.

Advantages: Bar charts provide useful information and are easier to read.

Disadvantages: Bar charts are not always good at spotting trends.

candlestick charts

Candlestick charts are the most popular chart type among forex traders. Candlestick charts are believed to have originated in Japan and use a series of candlesticks to show price movement over time. These types of charts are generally for the more experienced traders as many of us have no idea what to look for when using them.

Each candlestick represents a specific time period (such as a day or an hour) and is made up of four components: open, high, low, and close. The body of the candle is usually green or red, depending on whether the price closed higher or lower than it opened during that period. 

Advantages: Candlestick patterns can be used to predict future price movement and are a popular tool among technical analysts.

Disadvantages: Candlestick charts can be confusing for beginning traders and can take some getting used to.

What should you look out for on Forex charts?

When you want to start investing in Forex, there are a few things that you should keep in mind. By learning what these features are, you can become a better trader and learn how to use these charts to your advantage. These charts are commonly used in conjunction with others to help traders have a more complete understanding of their current and future trades.

trends

Trends can be observed by looking for price changes that have acted in a similar way over a long period of time. Experienced traders often have an eye for trends before they become mainstream and thus are able to capitalize before anyone else, taking their trades to the moon. Uptrends are a term used to describe a trend that is moving up, while downtrends are a term used to describe a trend that is moving down.

support and resistance

Support and resistance levels are zones that the price has a hard time breaking through. Support levels tend to act as a floor and prevent the price from falling any further, while resistance levels act as a ceiling and prevent the price from rising further. Traders know how to use them to their advantage because it is a way to maximize their profits.

graphic patterns

There are many different chart patterns that can be used to spot potential pullbacks or continuations of the current trend. One of the popular chart patterns is Head Shoulders (HCH), double highs and lows, triangles, etc. There are many different patterns that you should know about and the good news is that new patterns are always emerging, so it's never too late to start learning. Even experts are learning new things about chart patterns.

indicators

Indicators are mathematical calculations used to detect possible investment opportunities. Some popular indicators are moving averages, relative strength index (RSI), and Bollinger bands. These indicators are often used by more experienced traders as they can be more difficult to understand and use to your advantage.