Reading And Analyzing Forex Charts

When there were no computers and data feeds, the use of Forex charts to prepare Forex trading strategies was outside the mainstream of Forex and CFD trading techniques. The main reason for this constraint was the difficulty in creating the charts without the aid of computers. Every Forex chart had to be created by hand and the manual process was time taking and harder. But with the technology advancements and the increased popularity of technical analysis in Forex, the use of Forex charts has seen a great rise recently. Now they have become one of the most important technical tools used by the technical traders today.

Patterns on Forex charts
Patterns give signal to traders that the price of a currency is more likely to move in a direction based on the pattern when completed. The patterns are of two types – reversal and continuation. A reversal pattern gives a signal that the trend will reverse when the pattern is complete. On the other hand a continuation pattern signals that the trend will continue again on the completion of the original pattern. Therefore, it’s quite obvious why it’s important to learn how to read Forex charts.
Identifying the chart patterns in Forex and CFD trading is an art more than science. Though there is a good probability and signals given by every chart pattern, the price movement may not necessarily correspond to the pattern suggested by the chart. But this should not be a discouragement factor for the traders because once the basics of Forex charting are understood; the quality of Forex chart patterns can be enhanced by studying larger volumes and using secondary indicators.
A single chart can display a lot of important information and more precisely they are the illustration of struggle between the different buyers and sellers in the market. The technical analysis in Forex trading assumes that the currency prices moves in trends and the history repeats itself. Assuming all of these assumptions are true, Forex charts can be used to formulate the trading signals and can be the only tool which a Forex trader utilizes.

Understanding trend lines
There are many concepts which need to be understood before you read chart patterns and use them for Forex and CFD trading at xtrade some other reliable service provider. Understanding trend line is important which is a line drawn on Forex charts to signal a support or resistance level for the currency price movement. Support trend lines show the level at which the currency prices have difficulty in falling below. On the other hand, a resistance trend line shows the level at which the currency prices show difficulties in going above. These trend lines can be a constant price level or a rise or fall in the trend direction with time.
Thus Forex charts are very useful for the technical traders who engage in Forex and CFD trading and rely mainly on the historical movement of the currency prices and derive trends on the basis of that.

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