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forex trading graphs explained

So, what are the best price charts to use when you trade currency pairs? Some would say that a line graphical representation is enough to understand the dynamic. Manage your trading risk with a range of confirmation methods. Patterns are fractal, meaning that they can be seen in any charting. Forex chart Patterns: All types of trading charts are explained in details, this can help to make money in forex, crypto, stocks and any kind of trading can. THE WARM UP CSGO BETTING

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Typically, forex pairs are quoted to four decimal places 0. The exception to this is Yen pairs i. In this case the second spot after the 0 is referred to as a pip. What is a Forex Chart? A forex chart is simply a graphical depiction of the exchange rate between to currencies. It shows how the exchange rate of currency pair has changed over time. For example, the chart above Euro vs. Dollar shows how the exchange rate between Euros and US dollars has fluctuated over time. The choice is yours.

How do Forex Chart Timeframes work? The amount of time shown on the chart depends on the particular timeframe you select. By default, our forex charts are set to daily 1D timeframes. What this means is that each point on the graph, whether it be a line, candle or bar represents the trading data for one day. If you were to change the timeframe to a 60 minute chart, each point on the chart would now represent 60 minutes worth of trading data. Example below: With most free forex charting tools you can choose to display timeframes from as low as 1 minute all the way up to one month.

If get more advanced charting software, you can view lower timeframes. Types of Forex Charts Forex traders have developed several types of forex charts to help depict trading data. The three main chart types are line, bar, and candlesticks. Compared to a line chart, which shows the price close to close, candlestick charts show four times the amount of information, displaying the close, open, low and high price of a given period.

Diagram showing the Open, Close, Low and High prices of a candlestick. The body of a candlestick represents the difference between the opening and closing price of the currency for a given time period. If the opening price of the candle is lower than the closing price, the candle body color is green. If the opposite occurs, and the opening price is higher than the closing price then the candle body color is red.

Wicks represent the highest and lowest prices reached during the given time period. An Overview of Forex Indicators Currency charts help traders evaluate market behaviour, and help them determine where the currency will be in the future. To help make sense of the currency movements depicted on a chart, traders have developed a number of different visual guides to assist them — indicators. How to the Double Top and Bottom Chart Pattern The Double Top is a reversal chart pattern that comes as a consolidation after a bullish trend, creates a couple of tops approximately in the same resistance area and starts a fresh bearish move.

Conversely, the Double Bottom is a reversal chart pattern that comes after a bearish trend, creates a couple of bottoms in the same support area, and starts a fresh bullish move. We will discuss the bullish version of the pattern, the Double Top chart pattern, to approach the figure closely.

To enter a Double Top trade, you would need to see the price breaking through the level of the bottom that is located between the two tops of the pattern. When the price breaks the bottom between the two tops, you can short the Forex pair, pursuing a minimum price move equal to the vertical size of the pattern measured starting from the level of the two tops to the bottom between the two tops.

Your Stop Loss order should be located approximately in the middle of the pattern. The pink lines and the two arrows on the chart measure and apply the size of the pattern starting from the moment of the breakout. To clarify, we use a small top after the creation of the second big top to position the Stop Loss order. Notice that the Double Bottom chart pattern works exactly the same way but in the opposite direction.

Similarly, the Head and Shoulders is another famous reversal pattern in Forex trading. It comes as a consolidation after a bullish trend creating three tops. The first and third tops are approximately at the same level. However, the second top is higher and stays as a Head between two Shoulders. This is where the name of the pattern comes from. The line connecting these two bottoms is called a Neck Line. When the price creates the second shoulder and breaks the Neck Line in a bearish direction, this confirms the authenticity of the pattern.

When the Neck Line breaks, you can pursue the bearish potential of the pattern that is likely to send the price action downward on a distance equal to the size of the pattern — the vertical distance between the Head and the Neck Line applied starting from the moment of the breakout. Your Stop Loss order in a Head and Shoulders trade should go above the second shoulder of the pattern. The inclined pink line is the Neck Line of the figure. The two arrows measure and apply the size of the Head and Shoulders starting from the moment of the breakout through the Neck Line.

The red circle shows the head and shoulders chart pattern breakout. You need to hold a bearish trade until the price completes the size of the pattern in a bearish direction. At the same time, your Stop Loss order should go above the second shoulder as shown on the chart.

As with the other patterns we have discussed, the Head and Shoulders chart pattern has its opposite version — the Inverse Head and Shoulders pattern. It acts absolutely the same way, but everything is upside down. If you would like to learn more about the Head and Shoulders chart pattern, check this live trading example.

Pro Tip: using MetaTrader 4 Zigzag Indicator to spot Chart Patterns One of the best-kept secrets from seasoned traders lies around a chart pattern recognition indicator. The good news is you can also have it. It is built into the default version of the MetaTrader 4 trading platform. The indicator is called ZigZag. What it does is to represent the general price action with straight lines by neglecting smaller price fluctuations and putting emphasis on the real-deal price moves.

This way you can very easily visualize a real pattern on the chart. The chart includes the ZigZag indicator expressed by the straight red lines on the chart. In the middle of the chart, we see that the ZigZag lines are creating descending tops and descending bottoms, which is a symptom of a Falling Wedge chart pattern.

See that the highs and the lows of the pattern stand out in a very pleasant way thanks to the ZigZag indicator. You can hardly miss the pattern on the chart. In the red circle we see the breakout through the upper level of the pattern — the confirmation. Then we can trade for the two targets of the pattern. The first one equals the size of the wedge — marked with the smaller pink arrow.

The bigger pink arrow measures the size of the Pole.

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Flags and pennants Gaps Forex charts also tell you exchange rate levels the market previously reversed to the upside at and below which buyers tend to place bids.

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Best hedging strategies forex How do Forex Chart Timeframes work? Forex trading charts are an introduction to forex trading. They are called candlestick patterns. Currencies are always traded in pairs on Forex. Was it this?
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Forex trading graphs explained Each chart will have its own advantages and disadvantages. Key Takeaways A forex chart is the graphical representation of the relative price performance of a currency pair or pairs. Another way to display the price is forex trading graphs explained using a bar chart. These candlesticks filter out some noise in an effort to better capture the trend. They may use the same scale as prices and plot over the top of the prices on a stock chart.

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However, things are actually more complex than that, and the list of advantages of forex charts does not end here. The Advantages of Forex Charts There is a reason why live forex charts have become irreplaceable in modern forex charts analysis. Most of these forex charts are straightforward and easy to interpret.

Too easy, some would say, as traders are becoming too dependent on what the charts are telling them and neglecting other types of analysis. In any case, forex charts are easy to interpret, but hard to predict. They can help traders determine crucial moments and identify trends. They also serve as a visual aid, summing up copious amounts of data into a nice, compact package that is easy to interpret and use. The best part is that most of these charts are made automatically and are available on almost any trading platform.

The only real downside is picking the right one and interpreting it properly. The interpretation part will receive due attention in a little while, but it is far more important to make sure the forex charts being used are legitimate; otherwise, the forex chart patterns will not be accurate and the forex charts analysis will not be reliable.

Forex Charts Online The fact is that most of forex trading is done online, so the majority of currency charts must also be available online. This brings a whole new dimension, as not all brokers — or live forex charts they offer — are legitimate. Of course, most frauds get discovered relatively early on, but this is of little comfort to those they swindled. In order not to fall prey to these frauds, it is imperative to know where and how to get the right forex charts.

Or, should I say, which forex charts to choose. Most brokers employ platforms with some level of charting options, so creating, analyzing and interpreting charts should not be that much of an issue, as long as the data feed is legitimate. A good advice would be to try out charting packages and find the one that suits your purposes the best.

Other than that, most reviews on forex brokers also deal with the quality of charts they offer, among other things. Of course, there are sites that offer free forex charts, or they can at least offer you a deal: sites such as DailyFX or Investing. But the main part is not getting your hands on a forex chart. Actually, it is the forex charts analysis that need concern you the most. Interpreting and Analyzing Forex Charts Analyzing currency charts is just as important as getting the right tools for the job.

After all, no accurate forex charts analysis can be done if the forex chart patterns are inaccurate. Also, having the best and clearest forex chart patterns is useless to someone who does not know how to make use of them. In essence, there is no single, foolproof way of analyzing currency charts. Some forex traders focus on the fundamental approach, trying to incorporate currency charts into their own prognosis, based on factors such as interest rates, employment, inflation, political situation and the overall state of the economy, which can greatly affect the value of a currency — either in a positive or a negative fashion.

The main sources of information for such traders would be news outlets and various texts by analysts from around the world, while currency charts would primarily serve to prove their suspicions or refute them entirely. On the other hand, a technical forex trader would rely heavily on live forex charts and combine them with various technical indicators in order to predict future price action.

To whatever extent possible given the circumstances! Either way, the actual price is dictated by supply and demand, and the only way to gauge it is via live forex charts, so learning to interpret them is definitely a priority. Regardless of which broker provides the actual service, the first thing to do is — you guessed it, to open the chart.

In order to do that, one would have to specify the currency pair, the data range as well as the period for which the chart would be updated. The data range determines the overall amount of data you require. The longer the range you choose, the more data the chart will contain.

Naturally, if your strategy involves frequent trading and not holding on to your positions for an extended period of time, it would serve little purpose to analyze the data from five years ago. Also, long-term trades should not be based on five-minute period currency charts. Once again, it all depends on the trader and his or her strategy. Regardless of what type of trader you are, the most commonly used type of forex chart is the candlestick forex chart, so learning to read these can be considered a priority.

Experienced traders can gauge price action off a candlestick chart in a single glance, although beginners should probably pay more attention than that. In any case, the basics of interpreting these charts as well as their elements have already been covered, so it makes little sense to repeat it.

Uptrend What has not been covered, however, is adding indicators onto existing charts. These are the favorite tools of technical traders, and most brokers have a selection of indicators which are already available to their clients right off the bat, with hundreds more available for downloading on the internet. Downtrend The final part is to identify a trend and to draw the corresponding trend line. Essentially, there are upward, downward and horizontal trends, and each of them can be exploited, provided you know what to do.

A chart aggregates every buy and sell transaction of that financial instrument in our case, currency pairs at any given moment. When the future arrives and the reality is different from these expectations, prices shift again. And the cycle repeats. Whether the transaction occurred by the actions of an exporter, a currency intervention from a central bank , trades made by an AI from a hedge fund, or discretionary trades from retail traders, a chart blends ALL this information together in a visual format technical traders can study and analyze.

Line Chart A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time. All you know is that price closed at X at the end of the period. You have no clue what else happened. But it does help the trader see trends more easily and visually compare the closing price from one period to the next.

The line chart also shows trends the best, which is simply the slope of the line. Some traders consider the closing level to be more important than the open, high, or low. By paying attention to only the close, price fluctuations within a trading session are ignored.

A bar chart is a little more complex. It shows the opening and closing prices, as well as the highs and lows. Bar charts help a trader see the price range of each period. Bars may increase or decrease in size from one bar to the next, or over a range of bars. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid.

As the price fluctuations become increasingly volatile, the bars become larger. As the price fluctuations become quieter, the bars become smaller. The fluctuation in bar size is because of the way each bar is constructed. The vertical height of the bar reflects the range between the high and the low price of the bar period. The horizontal hash on the left side of the bar is the opening price, and the horizontal hash on the right side is the closing price.

A bar is simply one segment of time, whether it is one day, one week, or one hour. Candlestick charts show the same price information as a bar chart but in a prettier, graphic format. Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block or body in the middle indicates the range between the opening and closing prices.

Traditionally, if the block in the middle is filled or colored in, then the currency pair closed LOWER than it opened. Here at BabyPips. They just look so unappealing. A color television is much better than a black and white television, so why not splash some color on those candlestick charts?

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