Currency Exchange Charts

Introduction to Forex Currency Exchange Charts

There are two main factions concerned with the practice of forecasting prices on the Foreign Exchange Currency Market (FOREX).

One approach is called Fundamental Analysis. This method depends on news reports and economic data releases that cause forex traders to either buy or sell currencies, depending on how they interpret the information and how they think the market comprised of other traders will react.

Currency Exchange Charts

Technical Analysis with Currency Exchange Charts

Technical analysts think that trader response to all past news events and economic data releases are reflected graphically on price charts. The price data displayed on a chart over a period of time forms patterns that repeat, giving technical traders the ability to predict future price movement. Some traders steadfastly cling to one method or the other, but many, probably most, combine the two methods of technical analysis to their preferred extent.

For our purposes, we do not intend to declare one method of analysis superior to the other, or influence the trader’s decision; that is a very personal determination. We do intend, however, to examine currency exchange charts more closely in an attempt to demonstrate the value of this powerful trading tool.

History Currency Exchange of Charts

The Japanese were using price charts called candlestick charts to predict the price of rice over 300 years ago. The reason for this name is that the price bars showing the starting or opening price, the high and low price, and the settlement or closing price resemble a candle, with the wax part called the real body and the wick is referred to as the shadow. This shadow can extend above the top and below the bottom of the real body, giving it the appearance of a candle with a wick at both ends. On a price chart, a candle where the closing price is above the opening price will have a solid real body and a candle where the closing price is below the opening price will have a hollow real body.

There are so many variations of real body and wick lengths and so many patterns made from combining candles that a trader could spend years learning about them and much trader educational material is dedicated to this subject.

Stock markets have used price charts since they began. Along with candles, they used a line chart that typically connected the day’s closing prices to form a zig-zag line. There is also a bar chart that depicts high and low prices with a vertical line. A 90 degree line extending to the left from some point on the vertical line represent the opening price and a line to the right shows the closing price.

Computer Generated Forex Charts

By the time Forex trading on the retail level came along, the personal computer and trading platforms made it possible to generate charts in practically infinite variations. Forex brokers make these charting programs available to their active and potential clients. Even though the computer has made charting automatic and available for much shorter time frames, the concepts that have served traders for centuries are still applicable.

For a more complete examination of currency exchange charts, their interpretation and application, visit contact LucrorFX today.

 

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