How Do You Read a Chart

In trading the markets the chart is the basic market trading tool used by all traders. The chart will show info about a xauusd instrument - the chart will show the general direction of prices, the chart will also show the prevailing price of a gold & the chart also will show the historical movement of the chart prices.

Traders will use these charts to identify where to place trades. From the chart the trader will analyze the market movements using indicators so as to identify the direction of the market and determine the trade to open.

Traders must therefore learn how to use charts before they can begin transacting in the online market.

The following are the different things which a gold trader will need to learn about charts.

Types of Charts

There are 3 types of charts

Line Chart - this charting techniques plots a continuous line which connects the closing prices. For exemplification if a trader is using the five minutes chart then this line chart will draw a continuous line which connects the closing prices of the market after every 5 minutes.

Bar Chart - This chart uses bars to show the price movements, & plots O-H-C-L - Opening price, High, Low, and Closing price for that period, e.g. if the period used is five minutes, the bar will represent the price data & the O-H-C-L points for the 5 minutes.

Candle Charts - These are the most popular/liked chart types as they are the most visually appealing & they represent the price movements in an easily identifiable way which clearly show when a market moves up or when it moves down using different colors to differentiate the direction. These candlestick chart look like a candlestick and they have a body that resembles the wax part of a candle & an upper and a lower poking and protruding line that resembles the wick of a candle.

Chart Periods - Chart Time-frames

A chart will draw charts based on various different time periods - these are 1 minute, 5 minute, 15 minutes, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart data is also referred to as a chart timeframe, e.g. the 5 minute trading chart period is oftenly known as the 5 min trading chart by the trader. This 5 minute trading time frame will represent info for the five minutes of trading, after the five minutes a different set of info will be used to draw another representation on the chart. For exemplification if a trader is using candle-sticks chart, the data of one candlestick will draw data of that five minutes, after those five minute another candlestick will be drawn using price information of the next five minutes - when these candlesticks are combined they then make a graphical representation which shows the overall direction of market prices often known as the market trend. Traders can then use this info to make trade decisions.

Because the most oftenly used charts are candles charts we shall discuss how to read charts specifically candle charts.

How to Use Candle Charts

The candlestick charts uses candlestick that have different colours to represent different price moves, blue candles show prices closed higher than where they opened, red candlesticks show prices closed lower than they opened. This color representation is then used by the online traders to identify when price has moved upwards or downwards.

The candles also show OHCL:

O - Opening Price

H - Highest Price

C - Closing Price

L - Lowest Price

These price points are represented using a formation which looks like a candlestick, the distance between the opening price & closing price is represented by what is referred to as body, this part looks like the wax part of a stick. The high price is represented by a protruding line protruding upward, this line resembles the wick of a candlestick, the low price is represented by a protruding line protruding downwards and it also resembles a candle wick facing down.

Candles

One can also add a indicator on the chart so that they can analyze the trading chart market using these technical indicators. Traders will need to set indicators on the so that they can get additional/extra information about a price trend and hence be in a better position to make a more informed decision. These indicators can be used to predict the likely market direction which the market is likely to keep moving in whether up/down.

One can use indicators like the MAs and Bollinger to identify the trend. Traders can also use other indicators like the RSI and stochastics indicators to identify when to open trade positions.

Trend-lines are also used to identify the direction of the candlestick charts trends and these lines canbe drawn on the charts to show this direction. A up-ward trend will be pictured by a trend line is moving up while a trend that is moving down will b e shown a trend line that is moving downward.

To learn and know how to draw a trend-line & how to trade using technical analysis a trader can learn about the trendline lesson under the learn xauusd lessons section of this siteesite, for indicators a trader can learn about indicators & their trading analysis on the indicators section of this web site.

Get More Lessons:

Trade Forex Trading

How Do You Read a Chart

Types of Charts

Chart Periods - Chart Time-frames

How to Use Candle Charts

Candles