subject: How To Read Forex Charts [print this page] At first glance, Forex charts can look confusing and cluttered. Especially if the template you've loaded in has some trend lines and other soon to be helpful indicators. Here are some tips on how to read forex charts.
It's best to work your way up and gradually add different moving averages and pivots so that you can see how you each of them helps you make informed trading decisions.
The most fundamental part of a Forex chart is the bars that show price movements. You can set these to a number of different look and feels but most people find that selecting candlesticks for their bars is the easiest at-a-glance method. We'll cover reading these bars a bit later.
Your Forex chart will have a timescale associated with it. This lets you know how much time each bar on the chart covers. It could be as low as a minute or as long as a month and there are lots of pre-set points in-between. To get a good overview of the direction the market is taking, it's useful to look at a 1 hour or 4 hour chart if you're a day trader. Daily, weekly or monthly charts will also give you a good idea of the overall trend of the market and, like swimming with the tide, it's usually easier for your trades to follow the overall market trend.
The bars on your Forex chart give a visual representation of how the price has moved in whatever time period you're looking at. If you're using candlesticks, the top and bottom of the thick part of the candle show you the opening and closing price for that timescale. The wicks - the lines above and below the candle - show the highs and lows that the price has reached during that time period. You can see by the height of the candles how much the market has moved in that time period - sometimes not a lot, sometimes a scarily big amount.
Trend lines are often used on charts to smooth out the spikes in the market. They take a number of previous prices and attempt to smooth them out to give you a better idea of what the market is doing. Moving averages are amongst the more common of these and they can either be "simple" moving averages, which just add up all the previous X prices and divide by whatever value X was, or they can be weighted so that more recent prices are given more emphasis. Again, sites like Wikipedia will show you all the math behind them or you can just load them in using the menus on Metatrader.
Once you get comfortable with these Forex chart basics, you can move on to some of the other indicators that are available and start to find out the Forex signals that they're sending to you. Just remember that there is a trade off between adding extra information on your charts and your ability to get a clear picture of what's happening to your chosen currency pair.
