How To Apprehend A Forex Chart And How To Apply It In Your Trading Activities
by Chris on February 15, 2010
The forex chart is presumably the most basic tools in a currency trader's arsenal. Simply put, it is a graph of a specific currency pair's movements over a given period of time. Reading forex graphs is essential to a trader's business, so it's important to grasp how to read them and realize what they mean.
Every forex graph will be labeled with a currency pair: EUR/USD, USD/GBP, etc. Keep in mind, all forex trading deals with various countries' currency in relation to each other. The EUR/USD chart, for example, shows you how the euro and the US dollar compare.
Along the bottom of the chart is the timeline -- 15 minutes, an hour, a day, a week, or some other period. Going up the right-hand side are incremental amounts. For the EUR/USD chart, the amounts might be 1.4531 at the bottom, going up to 1.4561 at the top. And of course the middle of the chart shows what position the EUR/USD cross held at what time.
The forex chart is helpful because it shows in graphic terms how a currency cross is doing. You can see at a glance whether a currency is getting stronger or weaker, and you can act accordingly. Selecting the time frame helps you see very minor trends (in a 15-minute period, say) or more long-term ones (over the course of some days, perhaps).
You can find forex graphs all over the Internet, on websites of forex brokers, tutors, and on other forex-related sites. Those are OK for glancing at trends now and then. But to be a serious trader, you must have access to charts much more up-to-date, without having to go to a website. That's why trading softwares provide you currency charts, too (you need to have broadband Internet so you can be "always connected"). Obviously, if you're going to be trading, you need to have convenient access to the very latest charts.
With dozens of world currencies, there are far too many possible forex pairs for anyone to follow continuously. Currency charts show at a glance what any currency cross is up to, and a good software allows you to save multiple charts as "favorites." Certainly you'll want to follow the charts representing investments you've already made, and it's wise to have a some additional ones saved, too, so you can watch for trends in currencies you haven't traded yet. You never know when a lucrative new opportunity is going to be revealed.
The best way is to identify such opportunities is subscribing to the services of a reliable forex signal provider. A forex signal is a market forecast and trading recommendation. Plenty of such forex signals are available online against a modest subscription fee. But always check out first the background and the past performance of the signal provider, as only reliable forex signals will make you money, not losers.
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