How to Analyse Forex Charts

Forex trading is an exciting profession but unfortunately for newbie traders, they need a lot of support and guidance before they could start using real time forex charting tool. These are not available with any software which means that traders cannot analyze real time forex charts themselves. For these traders who want to take the right decisions in trading, it is essential to understand how to analyze real time forex charts.

First of all, before traders can analyze forex charts, they should understand the nature of the charts. Forex charts are primarily used to show the opening and closing prices of the forex market. However, forex charts also have other useful characteristics. One of these is the trend line. When traders analyze the trend line, they could easily tell about the ups and downs of the market.

Secondly, traders should understand how to properly read real time forex tick charts. Traders could clearly see the price trend lines when comparing real time ticks to traditional bar charts. In addition, traders would know about the breakouts in real time forex charts. These breakouts are called ‘station-dependent’ and indicate the beginning of a reversal or change in direction of the market.

Thirdly, traders must be able to determine the commencement of the bullish and bearish phase in real time charts. They could look for the reversal high and low in the charts. If the opening price is higher than the closing price, traders can conclude that the breakout is bullish, and if the opening price is lower than the closing price, traders can conclude that the breakout is bearish. Likewise, if the opening price is higher than the closing price, traders can conclude that the breakout is a continuation of a trend, and if the opening price is lower than the closing price, traders could conclude that the trend is trending downward.

Fourthly, forex charts have their own inbuilt indicator to indicate the commencement of a trend. These indicator patterns are known as figure charts. For example, the bullish candle pattern has an upward sloping line with one lower high and one lower low, whereas the bearish candle pattern has a downward sloping line with one higher high and one lower low. Figure charts are extremely useful when traders need to determine the start of a reversal or change in direction.

Fifthly, forex traders should not ignore the symmetrical shapes in the charts. The symmetrical triangle is formed by the main support or resistance level of a trend. Traders could use the symmetrical triangle to identify the start of a reversal. Alternatively, the symmetrical triangle could also signal the start of a bull market.

Sixthly, the volume of a candlestick can also be used to determine the intensity of a bull market or bearish market. If a candlestick is heavily influenced by small price movements, it could be considered bullish. On the other hand, if it is heavily affected by large price movements, it could be considered bearish. A combination of these indicators will help traders determine the market’s state of mind.

In addition, it is advisable to find out the relationship between the duration of the closing price and the opening price of a candlestick. This relation is called the moving average line, which is utilized in conjunction with the candlestick chart patterns. Traders could choose to trade on a range line or a horizontal line depending on the nature of the market. Regardless of what indicator or combination of indicators they choose, it is important to remember that they must always keep in mind that they depend on the previous three hours’s closing prices and opening prices, which are themselves influenced by several economic, social and political factors.