Forex charts are the charts plotted on X and Y axis showing the movement of currency prices over a specific period of time. The y-axis represents currency price and x-axis represents the time. The price movement of a currency over a definite period of time is predicted by the Forex charts, making them a critical tool in the field of Forex online trading. Based on the trends observed in the previous sessions the new trends in future are predicted.
What are Forex charts?
There are basically three types of Forex charts – line chart, bar chart and the Candlestick charts.
Line charts – This is a simple Forex chart providing an easy way to understand the currency price movement but these charts do not provide much information as it is formed by just connecting the end points of the currency closing points.
Forex bar charts – These provide more information with high, low and close price points in a given period of time. Thus the trader gets closer report of the price movement in a given period of time and can conduct online trading accurately.
Candlestick charts – Candlestick charts are the most popular Forex charts today which are similar to bar charts but provide the information in a clearer way. There are open and close points along with the wicks which show the highest and lowest points reached in a given period.
How Forex traders use charts for online trading?
A chart is used by the traders to perform the technical analysis of the Forex market which ultimately helps them to take better trade decisions. The charts contain the real time data and this helps the traders to remain updated on the currency movements. Based on the interpretation of the Foreign exchange charts the Forex online trading decisions are taken by the technical traders.
It is important for the Forex traders to understand how to read the FX charts because technical analysis of the currency price trends help them to become more aware of the new trends coming in the market. This enables traders to make the right buy and sell decision at the right time using the technical analysis done through the charts. Today a number of charting tools can be found by an online trading provider – Xtrade. These tools help to customize a chart and make it more analytical. A chart can be made for any type of currency pair and any type of Forex chart can be used to the show the movement of a currency pair.
But it has to be understood that though Forex charts are absolutely helpful and helps in understanding the trends for future, they are not an absolute or final solution. There are many other factors like socio-economic, political, interest rates, other economic factors which cause fluctuations in currency pricing.