With today’s complex financial markets operating around the world, world currencies now have their own set of resources to calculate their value over time.
The foreign exchange market, or foreign exchange market, helps individual traders and investors take advantage of the notional value of a currency by setting the differences between world currencies against each other and against other assets.
One resource is a currency chart that provides a visual representation of the value of one currency in relation to another asset. If you want to read currency charts to learn more about their meanings, here are a few basic steps for using one of these financial instruments.
#1. Learn Forex Basics
1. Get access to the latest currency chart information. To read and use currency charts, you need to get them from a trusted provider.
- Most small traders and investors who profit from currency trading use charts provided directly by their brokerage services. New online brokerage services often provide tools such as currency charts to help their clients keep track of current prices.
2. Select the time frame for your currency chart. One of the most important steps when using a currency chart or any other type of financial chart is to define specific time frames.
The values you see are only valid for the time period you specify. This online tool allows the user to change the view over a specified period of time, such as 1 day, 5 days, 1 month, 3 months, 6 months, or 1 year.
3. Watch the currency chart for the desired time period. You will see a line chart showing the change in the value of the currency over that time period.
- Look at your line chart on the y-axis. The y-axis or horizontal axis on currency charts often shows the price of a comparable asset. As the line oscillates, it shows how your chosen currency performs in relation to the currency or asset displayed on the y-axis.
- Watch the X Axis The X axis on a currency chart represents a time frame. You will notice that these two axes have a scale and segmented values where your graph oscillates randomly.
4. Take a look at a typical chart structure. Experienced traders and others will look at certain visual elements on a currency chart to predict where the price will move.
- Explore candlesticks or candlestick charts to take advantage of this modern financial resource. Candlestick charts show the range of assets during a given trading day, with tops and bottoms reflecting price action. Many currency charts include candlestick charts , especially online charts. By looking at this chart, you can get more information about the price and how it has changed over time.
- Look for elements like Fibonacci levels. A Fibonacci retracement is a type of rise and fall in price where a reversal can indicate an overall trend. Read this forecasting tool and apply it to your observations of currency charts.
- Watch the chart move relative to the moving average. Moving averages show how prices change over a longer period of time. This can come in handy when you are reading currency charts.
#2. reading a candlestick chart
1. Understanding graphic elements. You don’t need calculations to read candlestick charts. A chart is a simple visual tool that shows price movement over a specific period of time. Each bar shows four important pieces of information:
- opening price, closing price,
- The highest price and the lowest price at the same time.
- Just like regular bar charts, these candlesticks represent a specific measure of time.
- The advantage of candles is that they clearly show the relationship between the opening and closing prices.
2. Understand that candlesticks show the relationship between the open price, the high price, the low price and the close price. This means that this chart cannot be used to display securities that only have closing prices.
Candlestick chart readings are based on pattern analysis. Currency traders mainly use the ratio of up and down candles over a given period. However, candlestick charts provide recognizable patterns that can be used to predict price movements.
3. Learn patterns. There are two types of candles: bullish pattern candles and bearish pattern candles :
- A white (empty) candle is a bullish pattern that indicates/when the price opens near the low and closes near the highest price of the period.
- A black candlestick (fill) is a bearish pattern that indicates/is used when price opens near the highest price and closes near the lowest price of the period.
4. Understand how to read a bullish candle formation:
- The hammer is bullish if it appears after a significant decline. If the line appears after a significant uptrend, it is called a hanging line. A short bar and a long support form a hammer model . The stem may be empty or full
- The price line is a bullish pattern in which the first candle is a long bearish candle followed by a long bullish candle. The bullish candlestick opens below the bottom of the bearish candlestick, but the bearish candlestick closes more than halfway above the center of the bar.
- A bullish engulfing line is a strong bullish pattern if it appears after a significant decline. This pattern also serves as a reversal pattern that occurs when a smaller bearish candlestick turns into a larger bullish candlestick.
- The morning star is a bullish pattern that indicates a possible price decline. The star shape indicates a possible reversal and the bullish candle confirms it. This pattern can be in the form of a bullish or bearish candle.
- In a Bullish Star, a doji star signifies a reversal and a doji signifies indecision. This pattern usually indicates a reversal after a period of uncertainty. You should wait for confirmation before trading on Doji Star terms.
5. Understand how to read a bearish candle formation:
- A long bearish candle occurs when the price opens near the high and closes near the low.
- The Hanging Man pattern is bearish if it appears after a significant uptrend. If it appears after a significant decline, the pattern is called a hammer. The hanging man is identified by the shorter candle and longer wick above the bar and can be bearish or bullish .
- Dark cloud cover is a more bearish pattern if the second candlestick is below the middle of the previous candlestick.
6. Learn to read neutral candlestick patterns .
- A spinning top is a neutral pattern that occurs when the distance between the top and bottom, as well as the distance between the open and close prices, is relatively small.
- Doji candles are a symbol of anxiety. The opening and closing prices are the same.
- A double doji (two doji candles side by side) indicates that there will be a strong move after the current indecision is exited.
- The Harami pattern indicates a decrease in momentum that occurs when a candle with a smaller bar is in the area of a larger bar.
7. Understand how to read a reversal candlestick formation:
- Long-legged dojis often indicate pivot points when the open and close are the same and the distance between the top and bottom is relatively large.
- The Doji Dragonfly also signals a turning point, which occurs when the open and close prices match and the bottom is much lower than the open, high, and low prices.
- A gravestone doji occurs when the open, close, and low are the same, and the high is much wider than the open, close, and low. This pattern also marks a turning point.
- The star symbolizes a reversal. Stars are candles with smaller bars that follow candles with much larger bars where the bars are not next to each other. The axes may be adjacent.