The world of FX trading can seem like a very complicated one for beginners. This article tries to take some of the scariness away by introducing important concepts in FX trading to you. How to read charts and go about learning how to identify trends are dealt with here.
FX Trading:Reading Charts
Charts look can look extremely different depending on what options you would like to use so they can look extremely complicated at first glance. There are normally settings for the display style of price and the time frame you would like to use. Time frames can vary from one second to a decade, this depends on the charting system and the price is normally shown as a candlestick, line or bar. Japanese candlesticks are the most popular way of showing the price on a foreign exchange chart and there are many stories and theories about using these patterns to make predictions about the future price of a currency. The price of a currency can also be shown as a line. Line charts are a fantastic way of simplifying the display of the price. A line chart shows you the closing price for every period. Finally, bar charts are also used to show prices. They are similar to candlestick charts and show the opening price, the high and low as well as the closing price.
Identifying Trends in FX Trading
An uptrend is a market that makes a sequence of higher and higher lows. Uptrends are the ideal place to find buying opportunities as the currency tends to be cheaper. It doesn’t matter what strategy is used as trend traders will carry on buying this uptrend until it ends with a lower low. Conversely, a downtrend occurs when prices continue to decline over a period of time. Once this trend is identified by a trader there are numerous selling opportunities. Charts will show you how long daily trends might run for and as long as prices carry on decreasing, traders will carry on with this strategy. It is important to be able to identify trends as it should be a part of every Forex trader’s strategy, particularly if the currency he or she is trading in is on an uptrend or downtrend. Knowing what the trend is can save you a lot of money and tears in the long run.
Being able to read charts and analsing trends is a very important skill for every trader.