How Do You Analyze Charts?
How Do I Analyze Charts?
In trading - the chart is the basic tool used by traders to trade the market. The chart will show information about price movement - the chart will illustrate the general direction of prices - often known as trends or price trends. The chart also will show the prevailing price and the historical movement of chart prices.
Traders use these charts to identify where to place and open trades. From the chart the trader will analyze price movements using indicators so as to identify & determine the direction of the trend so as to determine the trade to open - whether buy or sell trade.
Traders must learn how to use charts before they can start trading forex.
The following are the different aspects of charts that a trader will need to know about charts.
Types of Charts
There are 3 types of charts
Line Chart - this line chart drawing technique draws a continuous line that connects the closing prices. For example if a trader is using 15 minutes chart then this line chart will draw a continuous line that connects closing price of the market after every 15 minutes.
Bar Chart - This bar chart use bars to illustrate price movements & draws OHCL - Opening price, High price, Low price, and Closing price for that time period, for example if the time period used is 15 minutes chart, the bar charts will represent the price data and the OHCL forex points for the `5 minutes chart.
Candle Charts - These candles charts are the most popular chart types because they're the most visually appealing charts & they represent the price movements in an easily identifiable way which clearly portrays when prices move up or when prices move down using different colors to differentiate the direction of price movement. These candles chart look like a candle & they have a body that resembles the wax part of a candle & an upper and a lower poking line that resembles the wick of a candlestick.
Chart Periods - Chart Time-Frames
A chart will draw charts based on different time periods - these are 1 minute chart, 5 minute chart, 15 minute chart, 1 hour chart, 4 hour chart, 1 day chart, 1week chart and 1 month chart. The chart period used to plot chart price data also is referred to as a time frame, for example the 15 min chart period is commonly referred to as the 15 min chart by traders. This 15 minute time frame will represent price data for the 15 minutes of trading, after those 15 minutes another set of price info will be used to draw another chart representation. For examples if a trader is using candlesticks chart, the price data of one candle will draw price data of that 15 min, after those 15 minutes another candlestick will be drawn using price data of the next 15 minutes - when these candlesticks are combined they then make a graph/ chart representation that portrays the general direction of prices often known as the trend. Traders can then use this chart information to make trading decisions.
The most commonly used charts are candles charts.
How Do You Analyze Charts? - How Do I Read Charts?
The candle charts use candles which have different colors to represent the price move - blue candles show prices closed higher than they opened - red candles show prices closed lower than they opened. This candle colour representation is then used by traders to determine when price has headed upward or downward.
The trading candle-sticks 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 candle with wicks on both ends, the distance between opening price and closing price is represented by what is referred to as body of the candlestick - this part resembles the wax part of a candlestick. The high price is represented by a poking line protruding upward - this line resembles the wick of a candle - the low price is represented by a poking line protruding downward - this line resembles the wick candle facing down.
How Do I Analyze Charts? - How Do You Read Charts?
The Japanese candles patterns techniques also have very many candles patterns which are used to trade the Markets. These patterns have different analysis & most common are:
| Reversal Patterns Candlesticks Patterns Candles Patterns |
How Do I Read Candles Patterns?
How Do You Analyze Charts?
