In order to read and benefit from currency charts, you’ll need to get them from a legitimate provider. Most of the smaller traders and investors who profit from currency trading use charts that are offered directly from their brokerage services. Select a time frame for your currency chart. One of the most important steps in using currency charts, or any other kind of financial chart, is to set a specific time frame.
The values that you view are only relevant to the specific time frames that you establish for them. Observe your currency chart for the desired time frame. You will see a line graph that represents changes in currency value over that period of time. Look at your line graph against your Y axis. The Y axis, or horizontal axis, for a currency chart most often indicates a comparative asset price. The X axis for your currency chart represents your time frame.
You will see that both of these axes have scaled, segmented values, where your line graph fluctuates in a variable way. Advanced traders and others look for specific visuals in a currency chart to try to predict which way future prices will go. Understand candlestick charting to take advantage of this advanced financial resource. Candlestick charts show a range of traits for a specific trading day, with a top and bottom that illustrate price movement. Look for items like Fibonacci retracement. A Fibonacci retracement is a specific kind of price spike or dip where a reversal can signify a general trend. Read up on this sort of predictive tool and apply it to your currency chart observation.
Look for movement against moving averages. Moving averages tell you how the price has changed over a longer time frame. These may be helpful when you are viewing your currency chart. Understand what the chart consists of.
There are no calculations required to interpret Candlestick Charts. They are a simple visual aid representing price movements in a given time period. In much the same way as the familiar bar chart, a candle illustrates a given measure of time. The advantage of candlesticks is that they clearly denote the relationship between the opening and closing prices.
Understand that candlesticks display the relationship between the open, high, low and closing prices. This means that they cannot be used to chart securities that have only closing prices. Interpretation of Candlestick Charts is based on the analysis of patterns. Currency traders predominantly use the relationship of the highs and lows of the candlewicks over a given time period. If the line occurs after a significant uptrend, it is called a Hanging Man. A small body and a long wick identify the Hammer.
The Pricing Line is a Bullish Pattern where the first candle is a long, Bear candle, followed by a long Bull candle. The Bull candle opens lower than the Bear’s low, but closes more than halfway above the middle of the Bear candle’s body. A Bullish Engulfing Line is a patter strongly Bullish if it occurs after a significant downtrend. It may also serve as a reversal pattern. It occurs when a small Bearish candle is engulfed by a large Bullish candle. The Morning Star is a Bullish Pattern signifying a potential bottom. The star indicates a possible reversal and the Bullish candle confirms this.
The Star can be a Bullish or Bearish candle. In a Bullish Doji Star, the star indicates a reversal and a Doji indicates indecision. This pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation before trading a Doji Star. The Hanging Man pattern is Bearish if it occurs after a significant uptrend. If this pattern occurs after a significant downtrend, it is called a Hammer.
A Hanging Man is identified by small candle bodies and a long wick below the bodies, and can be either Bearish or Bullish. Dark Cloud Cover is a Bearish Pattern that is more significant if the second candle’s body is below the center of the previous candle’s body. Understand how to read Neutral Candlestick Formations. Spinning Tops is a neutral pattern that occurs when the distance between the high and low, and the distance between the open and close, are relatively small. The open and close are the same.
The Harami pattern indicates a decrease in momentum. It occurs when a candle with a small body falls within the area of a larger body. It occurs when the open and close are the same, and the range between the high and the low is relatively large. The Dragonfly Doji also signifies a turning point. It occurs when the open and close are the same, and the low is significantly lower than the open, high and closing prices. A Gravestone Doji occurs when the open, close, and low prices are the same, and the high is significantly higher than the open, close and low prices.