Reading Price Charts Bar By Bar. 5 Tips To Read Forex Charts
Many novice forex traders tend to do common mistakes in the chart reading. In this article we will share 5 basic tips to read Forex charts.
Learning the basic skills needed to trade in the Forex market, such as reading the charts, it is important for the trader.
This is because as soon as you replenish their knowledge these vital skills, you will be much easier when it comes time to learn and practice the real forex trading.
By the time you finish reading this article, you will learn how to read forex charts and learn about the many pitfalls that may arise in the process of reading, especially if you have no experience trading in the Forex market.
Firstly, let us review the basics of forex trading, because they are directly related to reading forex charts.
Each currency pair is always quoted in the same way. For example, in EURUSD currency pair EUR is the base currency and USD is the secondary currency, and not vice versa. Therefore EURUSD chart shows that the current price fluctuations are approximately 1.2155, this means that 1 euro can be bought for around US $ 1.2155.
And your trade size (face value) – the number of the base currency you trade. In this example, if you want to buy 100 000 EURUSD, you buy 100 000 EUR.
Let’s look at the 5 main reading forex charts tips:
1. If you buy a forex currency pair, that is, take a long position, become aware of what you expect this currency pair will go up on the graph to make a profit in the transaction. That is, you want the base currency has increased relatively minor.
On the other hand, if you sell a forex currency pair with a short position, then you need to pair dropped on the graph to make a profit in the transaction. Therefore, you need to base currency weakened in relation to the secondary.
So far, everything is quite simple.
2. Always check the displayed time period. Many trading systems use different time frames to determine the entry point into the bargain. For example, the system can use a four or thirty-minute chart to determine the general direction of the currency pair by using indicators such as the convergence and divergence of moving averages, momentum or support and resistance lines, and then five-minute chart to find the increase after a temporary fall to determine the actual entrance.
Therefore, make sure that the graph that you are considering has the correct time frame for analysis. The best way to accomplish this – to set the desired time frame for the chart and indicators for the system, according to which you are trading to save and re-use these settings.
3. Most forex charts display the bid price and not the ask price. Remember that price is always set to the bid and ask (offer). For example, the current price of EURUSD may be 1.2058 ask and 1.2055 bid. When you buy, you do so at the price of the ask, which is the higher of the two prices spread, and when selling, you do so at the price of the bid, which is the lower of the two prices.
If you use a graph to determine entry and exit points, remember that when you place an order to sell when the price on the chart is equal to 1.330, it is the price at which you will sell, if there is no slippage.
On the other hand, you place an order to buy when the price on the chart is the same, then you actually buy at 1.3333. trading system will often determine whether your orders are placed just under the price on the chart, or you will need to add a buffer when buying or selling.
It should also be noted that on many platforms, when you place an order (to buy if the price will rise relative to a certain price, or to sell if the price falls relative to a certain price), you may select or “stop with bidet” or “stop with the sentence “.
4. Remember that the time shown at the bottom of forex charts refers to a specific time zone for which the graphics data have been built, for example, GMT or another.
It will be convenient to have on hand clock showing the world time to convert the time in different time zones. This is especially important if you are trading in line with economic releases statements.
You will need to transfer the issue of time in your local time and the time schedule to know when there will be a statement and, therefore, when you need to sell.
5. Finally, check to see if the time fits on your forex chart candle opening or closing of the candle. Your program for drawing graphs may be different from the others on the basis of programs.
The reason that we mention is that if you want to trade on a major economic announcements, either by entering the transaction in accordance with the changes after these announcements, or exit a trade before the announcement to avoid falling out of it in the process, then you need to be precise (to the minute!), since such transactions are made in accordance with what is happening in the first minute after the announcement, not the candle afterwards!
Now that you know all five points.
Now you have 5 key tips that allow you to read graphs to help you avoid the common mistakes that many novice forex traders in the chart reading. They will help you speed up the process of selecting a software package for charting and trading systems that you want to use to trade in the Forex market.
Now that you know this, keep in mind all these five points in the forex chart reading.