The Way To Read A Forex Chart

Gambling on Forex is all about forecasting and the only tools you have to help you

forecast are news and charts, both being ways of representing historical data. Therefore, if you want to make money out of currency dealing, it follows that you will have to be able to interpret these data properly. The news can be manipulated by corrupt governments and corrupt officials, but historical charts can not. Therefore, the first undertaking of any aspiring currency trader is to come to learn how to interpret a Forex chart.

The basic Forex chart is a graphical depiction of how one currency has fared against another. Therefore, you see USD/GBP and USD/EUR charts, showing the historical movements of the US dollar against the British pound and the Euro respectively.

When you open a Forex account with a broker, charting software should be part of the deal, if it is not look elsewhere quickly. The charting software will allow you to plot your two target currencies against each other.

A conventional Forex chart or graph will have two axes. The bottom axis or line is a time line and can read in any units: years, months, days, hours or even minutes. The side axis will read in units of currency: usually tenths of a cent or penny or possibly whole cents. Whatever the units are, they will be clearly stated on the chart.

You can alter the time frame at the click of a button so that you can first look at the long term tendency, then the medium term trend and finally the short term tendency, which could be as short the last hour or minute by minute. It is especially interesting to watch a currency pair when important news breaks, like, for example, the GBP/EUR when the UK election results are declared.

It could go either way, but if there is a strong vote for one party or another, it means stability, whereas a hung parliament means instability. Stability will probably mean a stronger GBP, but would the international financial community prefer a Labour or a Conservative government?

There are thousands of possible currency pairs, but most Forex brokers will only deal in a few dozen. However, it is very hard to remember all that data, so charting is helpful to remind the currency trader of recent and not-so-recent trends.

Some people say that charting is more or less a waste of time, because no chart would have predicted 9/11 and that is true, but the fact is in truth, that if you want to gamble real money on the Forex market, you will have to learn how to read a Forex chart.

by: Owen Jones

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