There are different kinds of forex charts that you can use in your trading activities. You have to learn about the technical analysis tools available to you in order to successfully reap profits. Your goal in trading should be more sustainable and consistent profits despite the losses that can inevitably happen in some of your trades. Choosing which charts to use in your technical analysis would depend on your trading style and personality. With the right kind of charting tools, you can increase your chances of success in forex trading.
What forex charts essentially tell you are price movements at any given period of time. Since these charting tools are mostly automated today, you can easily pull out charts for whatever timeframe you choose to follow the price action on your currency pairs. Prices on currencies are plotted in lines, bars, and candlesticks and are presented depending on the kind of technical analysis to be made. Some of the most common ways to analyze technical data are moving averages, trading volume, volatility, and strength and resistance levels.
Here are some of the most commonly used forex charts that you might find in your own forex trading system:
- Moving Average Convergence Divergence (MACD) – this indicator is one of the most popular among forex traders. This traces moving average levels so that forex traders can see convergence and divergence movements to time their trades.
- Relative Strength Index (RSI) – this indicator plotted on an oscillator takes note of trends over a period of time to show overbought currency pairs that could be setting up for a reversal. Closing a position just before the reversal can result in the greatest profits.
- Bollinger Bands – these forex charts are also popular in showing the volatility of the price action. This is used to spot times when the market is consolidating and the currency is overextending.
- Stochastic Indicators – these indicators are also plotted on oscillating forex charts that make use of candlesticks. Closing price movements are indicated at the top of candlesticks in these forex charts.
Your choice of charting tools to use in your trading activities should be made based on what you can understand and comfortably analyze. If you have not yet mastered your charting tools, you can take online courses or get advice from forex experts in various online trading forums. Check to see if your own trading system offers online assistance where in-house trading experts are on-hand to hold your hand and walk you through the different charting tools.
Do not rush yourself in making your trading decision using these forex charts. Even with the use of these charts, you can make a mistake in your trading decisions and cause losses in your trading account. Although there are huge profits that can be enjoyed with forex trading, rushing into trading without adequate knowledge and expertise can wipe you out of the trading game. Learn all the basics of forex trading and then equip yourself with the trading tools that you need to analyze the market before putting your money into your own trading account.