FOREX CHART

How to read forex chart
in Forex trading

If you are planning to delve into the industry of Forex trading, then you definitely have to learn how to read Forex charts. This is one of the basic skills you have to master, if you want to make it big as a Forex trader. Once you learn this skill, it becomes relatively easier for you to handle all the quirks in the Forex trading system.

Remember that each currency pair is to be quoted in the same manner always. For instance, when you have the EURO and the US dollar as your currency pair, then you will quote this as EURUSD. The EUR is your base currency while the USD is your terms currency. You cannot have the pair quoted the other way around. If you see a Forex chart showing that the EURUSD’s current price is pegged at 1.2065, this indicates that 1 EURO can purchase roughly 1.2065 US dollars.

Another thing you have to remember is your trade size, which is also your face value. This is actually the amount of the base currency that you are willing to trade. Continuing the scenario above, let us say you want to purchase 100,000 EURUSD. Thus, you are purchasing 100,000 EUROs.

If you are buying the currency pair, you should look for the chart that has the base currency stronger against the terms currency. This ensures higher chances of profit. But if you are selling, you should look for the chart that has the currency pair going down. The base should be weak against the terms.

Make sure to check the timeframe displayed so that you would be using the correct time when analyzing your data. The best thing you can do here is set up your own charts with accurate timeframes. Make sure to save these so that you can reuse them later.

Mostly, Forex charts would have the BID price, not the ASK price. For instance, the EURUSD’s current bid price is at 1.2065 and its ask price is at 1.2068. When buying, you use the ask price; while when selling, you use the bid price.

The time zone you see at the bottom of the chart is actually set to the time zone of your Forex provider. Thus, make sure to have a world clock on your computer so that you can convert the various time zones easily. This is a must when major trading announcements are being made. Convert the time of the announcement to that of your own time so that you’ll know when this announcement is due to happen, thereby knowing when you need to make your trade.

Lastly, make your Forex charts’ time is in sync with the time candle opens and closes. The charting software you’re using just might be different in this aspect.

These are just some of the basics on how to read Forex charts. Go ahead and do more research to better prepare yourself as a Forex trader.