The Meaning of FOREX Price Charts and How to Use Them
There is one very important factor that you should consider
with great care if you are willing to become a successful,
profitable Forex trader. This ever important factor that must be
always present in the trader's portfolio, is the ability to read
the charts.
The beauty of FOREX charts, as opposed to charts used for,
say, daytrading stocks, is that they are pretty easy to interpret
and use. They're a reflection of a slower-moving, stable economy
(the one of a country) compared to the future and daily drama of
company reports, Wall street analysts and shareholder
demands.
And, unlike stocks, currency charts rarely spend much time in
tight trading ranges and have the tendency to develop strong
trends (even though the FX market may be volatile, it's more
predictable). And, rather than tens of thousands of stocks to
analyze, you only have a few mayor currencies to trade.
The most common types of price bars, used in FOREX trading,
are the Bar Chart and the Candlestick chart:
Bars Charts - Price bars are a linear representation (a
line)of a period of time. This enables the viewer to see a
graphic representation summarizing the activity of a specific
time frame. For example they can be one minute or five-minute
time intervals depending on the system you are using. Each bar
has similar characteristics and tells the viewer several
important pieces of information. First, the highest point of the
bar represents the highest price that was achieved during that
time period. The lowest point of the bar represents the lowest
price during the same period. Regular bars display a small dot on
the left side of the bar which represents the opening price of
the period and the small dot on the right side represents the
closing price of the period.
Candlesticks - Japanese Candlesticks, or simply Candlesticks
as they are now known, are used to represent the same information
as Price bars. The only difference is that the difference between
the open and close form the body of a box which is displayed with
a color inside. A red color means that the close was lower than
the open, and the blue color represents that the close was higher
than the open. If the box has a line going up from the box it
represents the high and is called the wick. If the box has a line
going down from the box, it represents the low and is called the
tail. Many interpretations can be made from these "candlesticks"
and many books have been written on the art of interpreting these
bars ( Visit: http://www.1-forex.com).
So, the main thing to keep in mind between the two types of
price charts is this:
Candlestick charts are similar to bar charts in that the top
tip of a vertical line represents the high and bottom tip
represents the low. However, market activity between the OPEN and
the CLOSE is represented differently by the use of candlestick
bodies.
Because of their colored bodies, candles provide greater
visual detail in their chart patterns than bar charts. Which is
why many experts recommend you become intimately familiar with
Candlestick charts.
Omar Vargas is a freelance writer with articles published in a
number of places. You can learn more about Forex trading and its
great advantages over other kind of business at this useful
website: http://www.1-forex.com
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The Meaning of FOREX
Price Charts and How to Use Them
There is one very important factor that you should consider
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