Although some people might tell you otherwise, there is no way that you can successfully trade in the foreign exchange market without knowing how to read forex charts. Those who do tell you that you do not need to know what these charts are and what they tell you about the forex market do not care about your longevity in the trading arena – or, they could only be interested in using your money to make more gains for themselves. If you are serious about the “real” trading game, you have to know the rules of the game and be able to strategize in order to emerge as the winner. You are in luck because in the forex trading game, there can be more than one winner.
Just like many others before you, you can emerge victorious in your forex trades. But, not in the way that some forex brokers tell you to – by sitting around and waiting for them to deliver their daily pips. You have to understand how the market moves and watch, maybe not as closely as a hawk, how the prices are fluctuating and what economic conditions are developing so that you can make a profitable trading decision. Your trading does not start when you purchase your first currency pair. Your trading starts when you start putting together your trading strategy, plotting what patterns to watch for in the forex charts so that you are ready to implement them when they present themselves in real time.
In a sense, forex charts serve as your forecasting tools in forex trading. They provide a graphic representation of how currency prices are moving. This includes opening and closing prices as well as highs and lows on day charts. There are also forex charts that simply trace currency prices as they fluctuate in seconds and minutes during the day. You have the liberty to choose the period that you want to see depending on what your trading strategy is. Day traders normally look at charts in shorter time frames while those who are more cautious about their trades look at longer time frames for a broader perspective at price action.
Although there are no absolute guarantees that the prices will move in a certain direction, these charts are considered to be a good forecast of what might happen based on patterns tried and tested in actual historical data. Any trader should understand and feel comfortable with whatever forex charts he chooses to use in his trading activities. There are a lot of these charts offered by various forex brokers, from the simplest to the most complex. These charts, even if they are almost always thrown in as a free service, are useless if the trader does not understand how to use it to his advantage. In the end, these forex charts are simply tools that can be used any which way you want. How much you profit or lose in your trades would still depend on how good your trading strategy is and how faithful you are in implementing the tried and tested rules you have set up at the beginning of your trade.