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Forex charts provide you with an overview of local and global trends in forex trading.
It is a key element in any forex trader’s toolbox and if you want to become a dedicated trader you need to master the skill of interpreting charts.

What is a forex chart?

A forex chart is a graph of the price of a currency pair over a fixed period of time. This chart could be created for any currency pair like the EUR/USD or GBP/CAD or any other currency pair you get to see on your trading platform. Free forex charts are available on numerous websites. These free charts are fine for glancing at currency trends from time to time, but it is doubtful if all of them get updated in real time. So when you use a forex chart, make sure you are using one that gets updated in real time or else it would be plain waste of time consulting these charts. Of course most trading platforms have multiple forex charts, but you still need to be careful on whether they get updated in real time. We will talk more of the technicalities of currency charts but before that we must get the basics right.
What you need to know is there are three types of charts, namely line chart, bar chart and candlestick chart—or in other words there are three chart formats. Line chart combines the plotting of time period on one axis and currency price on the other axis. When the different price points are plotted against time and then you join them up by a line, you get a line chart. As you know this is really simple. Bar charts are slightly different, in the sense they indicate the “open”, the “high”, the “low”, and the “close” for that particular currency. Candlestick charts are similar to bar charts, the only difference being its superior graphic features.
When you actually do forex trading, its advisable that you consult the best charts and not rely entirely on that which is provided on your trading platform. To rely on professional forex chart providers would be ideal. For instance you could refer to the charts provided by FxTrek and FX-Charts.
An FX chart provider should provide you with accurate and easy-to-read charts and not boggle you down with advice on what to trade and what not to trade. It is not the advice they give you which matters. On the contrary you should be looking at the accuracy of the charts.

What does a forex currency chart show?

In simple terms it shows the movement of currency pairs against one another over a period of time. For example, a EUR/USD chart shows you how the US dollar and Euro have moved against one another during the period for which the chart is plotted. They are useful to have around. For example if you were trading a particular pair of currencies you could look at the chart and see if a particular currency were getting stronger or weaker. You could then plan to change your stop loss or exit the trade or whatever you deem suitable. An important aspect of the forex currency chart is the time frame of the chart. If you consult a 5-minute chart, maybe with some experience you could figure out minor trends, but if you want to place a long-term trade make sure you consult a chart with a longer time frame.

Different types of chart indicators

Forex charts could include Bollinger Bands, MACD, Parabolic SAR, Stochastics, and Relative Strength Index (RSI). It is important you know more about what these charts mean to forex trading. Bollinger Bands charts could measure the volatility of the market, and are used in forex markets that are ranging.
MACD charts are used to figure out trends early on, and you could also use it to spot trend reversals. Parabolic SAR is an indicator that gives signals that is either bullish or bearish. This chart is best used in trending markets. Stochastic charts indicate either oversold and overbought conditions. Relative Strength Index (RSI) is similar to stochastic chart because it also indicates conditions of overbuying and overselling in the market. Although you must be pretty bugged by these high sounding words, you must be aware that these charts mean a lot in forex trading.
Remember that every chart or chart indicator has its own strengths and weaknesses. So don’t rely on a single chart. Use at least a minimum of four charts to figure out which way the market were going. Simultaneously, check out if there was anything happening in the fundamental analysis scenario. Was there going to be key data releases? Sometimes the market could be awaiting an imminent data release, in which case you would have to reckon with that too. Whatever be the situation in forex trading, there is no substitute to actually going out there and learning on the job. That’s what you should be doing.

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