Every successful Forex trader relies on Forex charts to help them understand the current nature of the market so that they can make successful and lucrative trades. The right chart with the right information is like a map, telling the trader what has happened and where the trends are pointing.
Why Traders Use Forex Charts
A Forex trader needs information in order to understand what’s happening in the currency markets. They can then use that information to make educated and high-percentage trades.
Forex charts are an information goldmine, because they actively track the performance of currency pairs, or the value of one currency against another. Forex charts tell investors whether a currency pair is going up or down and how a currency pair has performed over a certain amount of time.
A highly skilled investor can use this information to understand important valuation trends and how a currency pair’s performance is tracking with a wide variety of indicators. Visually, a chart is much easier to act upon than simple numbers, but there are still keys to learning how to read them effectively so that a trader can act instantly.
How to Read the Numbers Like a Pro
Forex charts can be plotted as:
- Line charts
- Bar charts
- Candlestick charts
In the Forex realm, the candlestick chart is the most popular and widely used option. Initially, a candlestick chart may seem confusing, but as you get more comfortable with Forex trading, you’ll be able to look at a candlestick chart and instantly gather lots of information.
In a candlestick chart, each “candlestick” represents a length of time. The size of the candlestick’s body indicates how much a currency pair increased or decreased over that period of time.
If the candlestick is green, it means the currency increased in value. Red candlesticks mean the currency lost value. The “wicks” or lines at the top and bottom of the candlestick show what the highest and lowest prices were within that period of time.
One great way to see examples of candlestick charts is to use SmartTrader, which includes them in its free plan.