For forex beginners, it’s not uncommon to simply order trades on a whim.
More senior traders are telling us that we should analyze FX charts more and start trading after we have a trading plan.
So what are the common chart types on FX trading software?
Why do we need currency charts in the first place?
Because charts can better show the market price changes and trends.
These moves are usually in one of three chart types: K, bar and line charts.
one
The K-chart, also known as the candle-chart, contains a lot of information and is one of the most popular charts for currency traders.
Traders can see the highest, lowest, opening and closing prices on a K-chart.
The K line has three points: the open, the close, and the shadow.
The shadow line represents the highest to lowest range, and the entity shows the closing price above or below the opening price.
If the close is higher, the entity is filled, and if the close is lower, the entity is empty.
two
The bar chart shows the opening, closing, high and low prices of currency pairs.
The top of the bar shows the highest price traded over a certain period of time, and the bottom shows the lowest price.
The bar itself shows the trading range of the currency pair, with the horizontal line on the left showing the opening price and the one on the right showing the closing price.
3.
Line charts are generally considered to be the simplest of all three, and are popular with beginners of forex, while more experienced traders prefer K-charts or bar charts.
A line chart simply shows the price movement of a currency pair — a line connecting the closing prices over a period of time.
Four.
Why use charts when trading the forex market?
Many currency investors will tell you that using charts helps them predict future price movements.
However, if you look at the records of most forex traders, you will see that the vast majority of traders do not make a profit.
The best way to use charts when trading forex is to try to enter positions against the major market participants (banks, financial institutions, etc.) as these are the ones who really drive the market.
As a result, common market information that can be reflected in charts includes key support and resistance levels.
Once you get all these support and resistance levels on the price chart, you will start to see that prices tend to react in predictable ways around these key levels.
Therefore, by using as many tools as possible to plot some key support and resistance levels on the chart, it will increase your chances of success because you will be trading with big institutions rather than retail investors.
So if you’re still struggling to make money from the forex market, this is something you’ll want to consider doing in the future, as it’s widely regarded as the most reliably profitable way to trade and one of the most effective ways to use price charts.
