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The Beginner’s Guide to Reading a Forex Chart

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make a call with wi fi calling apple support charts are the basis for a discipline called “technical analysis”, which aims to anticipate future exchange rate movements by analysing historical price data, recurring chart patterns, etc. Now you understand some of the details involved in how to read forex charts, let’s look at some of the ways traders use these charts to make trading decisions on when and what to trade. Looking at your whole bar chart, you get a sense of the big-picture movement for the chosen currency pairing over the period you’ve selected. If your picture seems incomplete, you can adjust your time period to capture a larger period. A small horizontal line sticking out from the left side of the bar is the opening price. The small horizontal line sticking out from the right side of the bar is the closing price.

A breakout occurs when a currency pair moves beyond a previously established support or resistance level. Breakouts can indicate a strong trend and can be good entry points for traders. Traders may look for a breakout to confirm that the currency pair is likely to continue trending in the same direction. The body of the candlestick represents the difference between the opening and closing prices, while the wick represents the highs and lows. On a bar chart, the opening price is represented by a horizontal line on the left side of the bar, while a horizontal line on the right side of the bar represents the closing price.

Prices also tend to extend and correct trends in Fibonacci ratios that lead to the computation of Fibonacci projection and retracement levels. Exchange rate charts allow you to observe trends and other common exchange rate patterns. If you compare multiple line charts, they can give you a better idea of exchange rate movement. For example, you could compare a line chart of high prices with a line chart of low prices for the same period. Significant differences between the two lines would indicate volatility in the exchange rate for that particular pairing.

Being able to identify patterns and correlations such as this is absolutely crucial for profitable forex trading. By using a detailed live chart you can detect the early stages of price movements and buy or sell accordingly. A typical forex chart tells you so much more than just the current and previous price of a currency pair, although this will form the basis of the chart. The chart will always have the time period on the x-axis, and the price differential on the y-axis. Usually, you will be able to zoom in to the chart to view a briefer period of time or zoom out to view a longer historical price relationship between a currency pair.

Learn How to Read Forex Candlestick Charts Like a Pro

The Moving Average Convergence Divergence indicator is a trend-following momentum indicator that helps traders identify changes in momentum and trend direction. The MACD is calculated by subtracting a long-term moving average from a short-term moving average. When a currency pair approaches a rejection area, traders often look for opportunities to enter or exit positions. A double top or bottom is a common technical analysis pattern that can indicate a potential trend reversal in a currency pair. A double top occurs when a currency pair reaches a high price, experiences a temporary reversal, and then reaches the same high price again before reversing again.

For example, suppose you see a Doji candle with the candle line at the bottom of the formation so that there’s a longer wick and no shadow. If you see that candle at the top of an uptrend, it may signal that the uptrend is reversing. For example, if a price move breaches the upper band, it might be expected that the price would then revert back to its mean, or in this case the middle moving average. Now that you’re up to speed, lets move on to what you really came for,how to read a forex chart. Here at, we don’t like to use the traditional black and white candlesticks.

live forex charts

When the order box opens choose the Forex pair, how much you would like to trade, the entry type and your take profit and stop loss levels before executing your order. Whilst there are many great indicators that can help you, often traders will fall into the trap of using too many indicators that inevitably point in the opposite directions to each other. This leads the trader to just end up confused on what they should be doing.

However, they can be good for identifying overall trends in the relationship between the two currencies. You can also pull up line charts for several pairings to get a sense of the overall strength of a particular currency. As you can see in figure 1, when you read a candle, depending on the opening and closing prices, it will provide you information on whether the session ended bullish or bearish.

When you choose a currency pair, for example, EUR/USD, the chart you generate will show you how many US dollars you can buy for one Euro. Welles Wilder theRelative Strength Index is a momentum oscillator which measures the direction and velocity of price movements. With most free forex charting tools you can choose to display timeframes from as low as 1 minute all the way up to one month. Forex charts can be plotted for variety of currency pairs, from major pairs likeEUR/USDandGBP/USDto minor pairs such as AUD/CAD andNZD/JPY.

What makes forex trading difficult?

Developed byJohn Bollinger, the bands widen in periods of increasing volatility and narrow when volatility decreases. When you buy a currency pair, you buy the base currency, and sell the quote currency. Forex is the business of conversion, and since you are always comparing the value of one currency to another, forex isalwaysquoted in pairs. The data may be the same to create the chart but the way that data is presented and interpreted will vary. When the future arrives and the reality is different from these expectations, prices shift again.

Before we dive into the details of how to read Forex charts, let’s first discuss how to access them. Several websites and platforms offer live Forex charts, but one of the most popular is TradingView. Discover the range of markets you can trade on – and learn how they work – with IG Academy’s online course. In this article, we will explain in detail how to open and start trading on a MetaTrader 5 account. Table of Contents MetaTrader 5 | Choosing a Broker MetaTrader 5 | Download Creati…

Now, we’ll explain each of the forex charts, and let you know what you should know about each of them. Since the market was already in an uptrend, it may not have had the legs to push the price much higher. When you apply Candlestick patterns with additional technical confluence, it provides for a powerful combination of factors that can help increase your odds of winning.

Reading Forex Charts

There are three different types of charts that are most commonly used when trading the Forex market. You can view a forex chart for any currency pair of your choice, EUR/USD (Euros to US Dollars, GBP/JPY , and so on. Forex charts are an essential part of making money on the exchange and learning how to read them is the key to your success. Hone your skills and increase your chances of making money with this short guide.


Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold The Forex Geek and any authorized distributors of this information harmless in any and all ways. Each X or O represents a specific price increment, which can be adjusted based on the trader’s preferences. Forex.Academy is a free news and research website, offering educational information to those who are interested in Forex trading. Forex Academy is among the trading communities’ largest online sources for news, reviews, and analysis on currencies, cryptocurrencies, commodities, metals, and indices. When the MACD line crosses above the signal line , this can indicate a bullish trend.

Each box on the chart represents a specific price increment, which is determined by the trader’s preferences. They are less commonly used than other types of charts but can be a useful tool for certain traders. Candlestick charts are useful for identifying trends and reversals, as well as providing more information about the psychology of the market. The opening price is represented by a horizontal line on the left side of the bar, and the closing price is represented by a horizontal line on the right side of the bar. A high volume move is often seen as an indication that there is strong buying or selling pressure in the market.

What brokers trade futures and forex?

The price levels are depicted on a Y or vertical axis, on the right side of the chart. The lowest point of the bar will, conversely, show the lowest price reached by that pair during the same day. Bar charts are more advanced versions of line charts that allow you to see the highs and lows of a currency pair within the trading day, as well as whether it is a buyer’s or a seller’s market. Put simply, a forex chart is a chart or a graph that shows how the exchange rate of a currency pair, such as USD/EUR, has fluctuated and changed over time.

A forex chart is a graphical representation of the price movements of currency pairs in the foreign exchange market. Forex charts display the price of a currency pair on the y-axis and time on the x-axis . The chart typically includes various indicators, such as moving averages, trendlines, and technical analysis tools, which traders use to analyze market trends and make trading decisions.

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Price changes are a series of mostly random events, so our job as traders is to manage risk and assess probability and that’s where charting can help. Traders can apply overbought and oversold technical indicators like Stochastics or Relative Strength Index to find out when such irrational market conditions may be present. The next day, the GBPJPY price penetrated above the high of this Engulfing Bullish Candlestick, which confirmed that there would be additional bullishness in the market over the next few days. The main difference between simple and complex Candlestick patterns is the number of Candlesticks required to form the patterns.

Candlestick Chart

There are a lot of trends that you can recognize only by glancing at the graph. The concept of chart patterns is premised on the idea that human behavior does not alter quickly, and so history continues to replicate itself. When you learn of the bullish cycle, you’re looking at the general upward trend , whereas the Bearish trend is a declining trend of downs .

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All trading charts have ‘time’ along the horizontal x-axis and ‘price’ on the vertical y-axis. This means we can view historical prices as we move to the left of the chart. The dates and times shown will vary depending on how zoomed in or out you are on the chart. The more zoomed out you are, the more historical price action you will see. Learning how to read the main forex charts can give you a huge advantage when trading, especially when you’re a beginner forex trader.

If the currency pair is experiencing a bullish trend, a high volume move to the upside can be a sign that the trend is about to continue. A pip is the smallest unit of measurement in Forex trading and stands for “percentage in point.” It represents the smallest change in price that a currency pair can make. For most currency pairs, a pip is equal to 0.0001, although some pairs have different pip values. However, if a doji forms within an uptrend or downtrend, it may indicate that a reversal is on the way. However, charts can also be represented on other timeframes, which can be as short as one minute and as long as a year.

How to Read Trading Charts

One of the most important things to keep in mind when reading a line chart is that it only shows the closing price. This means that you will not be able to see the highs and lows of the currency pair during the period being charted. The four-hour, hourly and thirty-minute forex charts, tend to suit traders who like to trade intraday and hold positions for a few hours to a few days.

  • You should not feel you are attached to one chart that worked in the past if it is not longer functional.
  • This is the same as a line chart, except the area beneath the line is shaded, giving it the appearance of a mountain in silhouette.
  • Corrections are a normal part of market movements and can provide opportunities for traders to enter or exit positions at more favorable prices.
  • A Forex chart is a graphical representation of currency quotes over a period of time.

This often indicates that there is strong buying or selling pressure and can be a good indicator of a trend reversal. Every Forex chart represents one currency pair, such as the EURUSD chart, USDJPY (US dollar/Japanese yen) chart, or GBPUSD (British pound/US dollar) chart. Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. If after the buyer candle, the next candle goes on to make a new high then it is a sign that buyers are willing to keep on buying the market.

When you see the word ‘’ going forward, be sure to understand what time frame it is referencing. The “future news’ is now “known news”, and with this new information, traders adjust their expectations on future news. A chart incorporates all known news, as well as traders’ current expectationsof future news. Candlestick chart reading can be most useful during these volatile periods of irrational market behavior. Professional traders wait for this confirmation because they understand the concept of order flow and self-fulfilling prophecy.