How to Read Forex Charts
As a forex trader, the ability to read charts is very important for you to have. If you want to learn technical analysis well, then you must have the ability to read price charts well.
The existence of charts will make it easier for you as a forex trader to read price movements from time to time.
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A Complete Guide to Reading Forex Charts |
With the chart, you can determine the trend that occurs and find patterns of price movements that will later appear to create profit in trading.
If a trader does not know how to read charts well, then trading strategies that require expertise in reading charts will be difficult to implement. In fact, basically, forex charts are displays that show the movement of market prices.
So, before you can learn how to read the right charts, you must first understand the three types of charts used in forex trading.
1. Trading Line Chart
Trading Platform Line Chart
The line chart is one of the simplest charts on the trading platform. This chart is often used by traders and technical analysts because it can show complete data.
A line chart is shown as a line that will connect closing prices.
For example, trades were closed at certain prices in the past few days. Each of these closing price levels will be connected by an existing straight line, and here you can easily see the general price movement within a certain period.
For example, the trade is closed at the price on several consecutive days;
100,
200,
150,
250, etc.
These price levels will be connected by a straight line where on this chart you can see the general price movement over a certain period of time as shown below!
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Line Chart mt4 |
Master reading charts quickly and precisely on a demo account!
2. Trading with Bar Charts
Bar Chart on a Trading Platform
Bar charts are one of the preferred charts and are quite popular among American traders. Why is that?
According to them, bar charts are easier to use than other charts because the bar units are simpler.
Although slightly more complicated than line charts, these types of charts provide information about the open, close, high, and low prices over a period of time.
Because of this information, these charts are often referred to as OHLC charts (Open-High-Low-Close), and you can see them at the bottom of the bar chart below.
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Bar Chart on a Trading Platform |
- Low represents the lowest price ever traded in a given period of time.
- High represents the highest price in a certain time period.
- Close, The small horizontal line on the right represents the closing price.
The vertical line on this chart represents the range (or range) of prices in that time period. In the picture above, the opening price is lower than the closing price. But it could be at one point, the opening price is higher than the closing price.
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Bar Chart Mt4 |
In the image above, we can see that a bar represents a period of time, whether it's a month, a week, a day, an hour, or even a minute. It depends on how long of a time frame you plot the chart.
In short, to learn these graphs, you don't need to have a lot of complicated theory.
3. Trading with Candlestick Charts
What are candlesticks?
A candlestick is one type of price chart that reads price movements in the financial market technically.
It is named "candlestick" because its shape is similar to a candle. It is said that this chart comes from the land of Sakura and is also known as the Japanese Candlestick Chart.
To create a candlestick chart, you must have data on the opening price (Open), the highest price (High), the lowest price (Low), and the closing price (Close), also known as OHLC, within a certain period.
This chart provides information that is not much different from a bar chart. The difference between these two charts is only in "posture".
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Candlesticks |
The body itself describes the difference between the open and close prices over a given time period.Usually, the body of this candlestick chart is white and black.
If the body on the chart is white, then the open price is at the bottom; if the body is black, then the open price is at the top.
If the open price is below the closing price, then this position is usually called a "bull candle." In technical analysis, the terms "bull" or "bullish" are used when the market price tends to rise.
To describe falling price movements, the terms "bear" or "bearish" are used, so a candlestick that has an open price above the close price is called a "bear candle."
To make it easier for you to analyze this chart, you can use color combinations to make it look attractive and know the difference between a bull candle and a bear candle, as in the picture below!
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Candlestick |
To get a clear picture of this chart, you can pay attention to the example below, which shows the occurrence of price movements.
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Candlestick chart |
Many traders prefer to use this type of chart because it is more visually helpful to identify open, close, high, and low prices than bar charts.
Candlesticks are also included in one of the most widely used charts by technical analysts due to their easily recognizable ability to present data.
Then, what are the keys that must be possessed to read forex charts correctly?
1. Observe the pattern of price movements.
You need to adjust the pattern of price movements to the type of transaction you make. If you want to buy, then focus on the currency pair whose graph is on the rise.
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Uptrend Chart |
If you want to sell, then look for a currency whose graph is experiencing a decline.
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Downtrend Chart |
2. Examine the time frame and pay attention to the spread.
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Examine the time frame and pay attention to the spread. |
Make sure the chart display is on the same time frame as your analysis. In addition, you can also focus on one time frame for entry so that the trading process can be more focused.
Remember, you also need to pay attention to the difference between the selling price and the purchase value in order to be able to read the chart properly and correctly.
Ready to learn these three charts properly and correctly?
Don't worry if you still don't have the ability to read charts. You can learn how to read good charts using a demo account.
By utilizing charts as a tool in technical analysis, you can determine trends and find price patterns that have the potential to give you a profit.
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