A Review of Forex Charts - By: Thomas Bainbridge

In order to trade forex effectively, you may find it easier to use a range of trading tools. This could include trading software, forex charts, technical indicators, fundamental indicators, market data, price feeds, a trading system and a money management system.

With forex, the most common types of charts are line charts, bar charts and candlestick charts.

The simplest type of chart is the line chart. This depicts the price of a trading instrument over time in a linear format. Bar charts provide more information, such as the opening price, maximum price, minimum price and closing price for a given time period.

The most popular type of chart for forex traders tends to be candlesticks chart. These charts were originally developed in Japan to try and predict future movements in the price of rice. A candlestick chart gives the same information as a bar chart but in a format that some find easier to interpret.

The various types of investor speculate within different time frames. A day trader, for example, opens and closes their trades on the same day, while a long term trader often trades in time frames varying from weeks to years. Swing traders are somewhere in the middle, they usually open and close trades over the course of a few weeks.

The charts used by a trader will depend on the category into which they fall. A day trader often uses 2, 5 and/or 10 minute charts, while a swing trader will probably prefer 1 hour, 4 hour and/or daily charts. Long term traders tend not make decisions on the basis of short-term price movements and so usually prefer weekly or even monthly charts.

In order to display charts you will need access to charting software. If you trade the forex markets through a spread betting company then note that they will often give clients free access to a charting package. Firms like Financial Spreads andGFT will tend to offer charts for each of the 30+ forex markets that they offer.

If you want to see what’s happening to the euro, for example, you have to find a currency pair containing this currency such as the euro against the dollar or EUR/USD.

If the price of the currency pair you are studying is going up, you will notice that the chart is rising from left to right. If it is going down, the reverse will be true.

Although a chart will give you a visual representation of what has been happening to a market, there are ways to improve this picture. This is often done with the help of so-called technical indicators which are usually depicted on the same chart.

A technical indicator is a statistical formula used by traders to try and predict future price movements. Examples of technical indicators include moving averages, momentum indicators and volume indicators.

Of course, as with any technical analysis / chart based analysis investors need to be careful. Charts are based on historic price information and just because a market has behaved a certain way in the past does not mean that it will continue to do so.

Spread betting involves a high degree of risk to your trading capital and you may lose more than your initial deposit. Please ensure that spread betting fits your investment requirements as it may not be suitable for all types of investor. Before trading, ensure you fully appreciate the risks that are involved. Ensure that you only spread bet with money you can afford to lose. Obtain independent advice if required.

About the Author

A leading financial author based in the heart of London’s Canary Wharf. Thomas Bainbridge is a respected commentator on the financial markets including the financial spread betting markets

Article Directory Source: http://www.articlerich.com/profile/Thomas-Bainbridge/99350

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