What is a Forex chart?
A currency graph graphically represents the historical behavior, in different periods of time, of the movement of relative prices between currency pairs. Technical analysts and intraday traders will watch such charts to identify trends and various patterns that can indicate reversals, continuations, entry points and exits.
Many traders use currency charting software packages to determine the likely direction in a given currency pair in conjunction with other technologies, such as predictive forecasting software and online trading, to gain an edge in the currency markets.
- A forex chart is the graphical representation of the relative price performance of a currency pair or pairs.
- Technical analysts and daily traders look to such charts for signals and patterns to inform their trading decisions.
- The most common types of currency charts are line, bar, and candlestick charts; and the normal time frames provided by most of the platform’s charting programs range from tick data to yearly data.
- Forex charting software comprises a powerful set of digital tools to make technical trading and analysis more streamlined and efficient.
Understanding Forex Charts
Basically, a forex chart allows a trader to see the past, which according to technical analysts, can predict future price movement. Most forex brokers will provide free forex charting software for clients who have open and funded trading accounts. Currency charts, like those available for other securities, present information useful for technical analysis of a specific currency pair (FX).
Forex charts are essential tools for Forex traders who want to incorporate technical analysis to determine where to invest their funds, as they can reveal the existence of trends. Technical analysis is the review of past market prices and technical indicators to predict the future movements of an investment. These technicians believe that short-term price movements are the result of supply and demand forces in the market for a given security. Therefore, for technicians, the fundamentals of the asset are less relevant than the current balance of buyers and sellers.
Forex charts can use line, bar and candlestick chart types, and the normal time frames that most of the platform’s charting programs provide range from tick data to yearly data. A typical forex chart will show the time period on the x-axis and the exchange rate on the y-axis.
Currency charting software can be a powerful tool that users can customize and also trade directly in electronic currency markets.
Forex charts with technical indicators
Forex charts will have customizable settings for technical indicators, such as price, volume, and open interest. Active traders often use these indicators as they are designed to analyze short-term price movements.
There are two basic types of technical indicators:
- Overlays: These indicators do exactly what the name suggests. They can use the same scale as prices and plot over the top of prices on a stock chart. Examples include Moving Averages and Bollinger Bands®.
- Oscillators: Technical indicators that oscillate, or change, between a local low and high, and will be plotted or displayed above or below a price chart. Examples include the MACD (Moving Average Convergence Divergence) or RSI (Relative Strength Index).
Most charting programs will have many types of technical indicators to choose from. So with thousands of options, a trader must select the ones that work best for him. Furthermore, these indicators can, in most cases, become part of an automated trading system.
Forex charting software can also be made available through a broker by using a demo or trial account. New traders are advised to experiment with a couple of different brokers and chart offerings before deciding where to open their account.
While there are a number of forex chart patterns of varying complexity, there are two common chart patterns that occur regularly and provide a relatively simple method of forex trading. These two patterns are the head and shoulders and the triangle.
Forex charts and the Dow theory
Traders and investors have engaged in technical investment analysis for as long as there have been markets, but no one did more to popularize it than Charles Dow, the American journalist and founder of the Dow Jones Company, the Dow Jones Industrial Average (DJIA). and The Wall Street Journal.
Dow ran hundreds of editorials in The Wall Street Journal, many of whom defended its theories on technical analysis of stock price movements. Today, many forex traders follow their theories when trading in the foreign exchange (FX) market.
The Dow theory, as codified by its successors in The Wall Street Journal, is made up of six principles, which hold that asset prices move according to trends that result from the dissemination of new information. Dow theory values the study of trading volume to understand the underlying dynamics of a market, and forex traders who heed its advice will generally discount changes in exchange rates that result from low trading volume.
Forex charts faq
What is a Forex chart?
A forex chart is a price chart that shows the historical price and volume data of one or more currency pairs. Therefore, a forex chart graphically represents the historical behavior of a currency over various time periods, along with technical patterns and indicators and overlays.
How do I find Forex charts?
Currency charts are easily found online through financial portals, online brokerage platforms, or specialized currency information sites.
How do you make a Forex chart?
Interactive charts using technical overlays and tools can be created using your broker’s online toolkit. Specific Forex platforms and charting software can also be used by more advanced traders who need more functionality.
What is a currency table?
A forex chart is just another term for a forex chart.