"How To" Start Trading The Forex Market? (Part 6)
Martin Maier
Forex Price Charts, what DO they mean and HOW to use them?
Important numerous facts as discipline, trading rules, not being greedy etc., but one of the most important things is:
LEARN to read the charts as Charts represent the lifeblood of the market.
I admit that reading charts, and interpreting patterns, are more an art than a skill. Base and apply your entry and exit decisions on YOUR OWN combined methods of technical and fundamental analysis.
FOREX charts, are easier to interpret and to use. They reflect a slower moving, stable economy of a country, compared to the stock market, with its daily drama of company reports, Wall Street Analysts and shareholder demands.
Unlike stocks, currency charts do not spend much time in trading ranges and have the tendency to develop strong trends. Furthermore, Forex with its 4 Mayor currencies is easier to analyze than tens of thousands of stocks.
(Mayor currencies are: USD/JPY, EUR/USD, GBP/USD and USD/CHF)
The complimentary FREE live charting software, with the ultimate cutting edge technology provided by http://www.fenixcapit almanagement.com/ , will be absolutely sufficient for you to analyze and watch any one currency pair. Understanding just a few basic points about the technical analysis of currency chart can lead to increased profit potential.
Pricing - Price reflects the perceptions and action taken by the market participants. It is the dealing between buyers and sellers in the Over-The-Counter (OTC) or "interbank" market that creates price movement. Therefore, all fundamental factors are quickly discounted in price. By studying the price charts, you are indirectly seeing the fundamental and market psychology all at once , after all the market is fed by two emotions - Greed and Fear - and once you understand that, then you begin to understand the psychology of the market and how it relates to the chart patterns.
Data Window Chart - FCM and most online charting stations, when you click on a price bar or candlestick, it will display a small box of data usually called a display window which will contain the following items:
H = Highest Price L = Lowest Price O = Opening Price C = Close Price (or Last Price)
The most common types of price bars, used in FOREX trading, are the Bar Chart and the Candlestick chart:
Bars Charts -
Price bars are a linear representation (a line) of a period of time. This enables the viewer to see a graphic representation summarizing the activity of a specific time frame. As an example, I use 10 minutes, 60 minutes and daily time interval for my systems. Each bar has similar characteristics and tells the viewer several important pieces of information.
First, the highest point of the bar represents the highest price that was achieved during that time period. The lowest point of the bar represents the lowest price during the same period. Regular bars display a small dot on the left side of the bar which represents the opening price of the period and the small dot on the right side represents the closing price of the period.
Candlesticks - Japanese Candlesticks, or simply Candlesticks as they are now known, are used to represent the same information as Price bars. The only difference is that the difference between the open and close form the body of a box which is displayed with a color inside. A red color means that the close was lower than the open, and the blue color represents that the close was higher than the open.
If the box has a line going up from the box it represents the high and is called the wick. If the box has a line going down from the box, it represents the low and is called the tail.
Many interpretations can be made from these "candlesticks" and many books have been written on the art of interpreting these bars.
Chart Intervals & Time Frames:
A chart Time Scale & Period, or time frame, basically refers to the duration of time that passes between the OPEN and the CLOSE of a bar or candlestick.
For instance, with your broker software, you will be able to view a currency pair, in a 1-hour time frame over a 2-day period, 5-day period, 10-day period, 20-day period and 30- day period.
Most of the short-term time intervals (5-min and 1-min charts) are used for entry and exit points and the longer- term time intervals (1-hour and daily charts) are used to see where the general trend is.
About the author:
Veteran Trader Martin Maier is the Founder of Fenix Capital Management, LLC He is the developer of various futures and commodities trading programs and his systems have been ranked and rated by various large American Investment Profile Ratin
The latest information and news on Forex Trading:
Short-Term Forex Technical Outlook: NZD/USD (Daily FX via Yahoo! Finance)
The New Zealand dollar fell to a six-year low against the U.S. dollar over the last 24 hours of trading, and may continue to move lower over the remainder of the trading session as risk aversion continues to drive price action in the forex market.
Forex Trading Signals Update: Volatility Has Dropped, Look to Range Trading S...
Our forex trading signals saw mixed performance through the past seven days of trading, as our Momentum-based strategies continued to outperform while Breakout and Range signals were comparatively disappointing.
US Dollar Forecast to Advance versus Euro on Forex Sentiment (Daily FX via Ya...
EURUSD - Euro Forecast to Decline Further Against US Dollar on Forex Positioning USDJPY - Japanese Yen Likely to Continue Higher Through Short-Term Trading USDCHF - US Dollar/Swiss Franc Positioning Forecasts Further Strength GBPUSD - British Pound Forecast Unclear Against US Dollar USDCAD - Canadia...
Australia Intervenes in Forex Market, Spends Record 3 Billion to Boost Curren...
The Reserve Bank of Australia spent a record-breaking 3.15 billion to intervene in the forex market and support the value of its currency. Japanese exports dropped by the largest amount in nearly seven years, pushing the Trade Balance into deficit.
(AFX UK Focus) 2008-11-20 09:14 Turkish C.Bank-lengthens forex depo period to...
ISTANBUL, Nov 20 (Reuters) - The Turkish Central Bank said on Thursday it would extend the period of lending in the foreign exchange depo market to one month from one week as of Friday, in a bid to boost liquidity. It added it had cut forex depo lending rates to 7 percent from 10 percent for the dol...
Yahoo! News Search Results for currencies
Asian Currencies Fall on Week, Led by Rupiah, on Risk Aversion (Bloomberg)
Nov. 21 (Bloomberg) -- Asian currencies fell this week, led by Indonesia's rupiah, as investors flee emerging markets to avoid risk from a deepening global economic slump.
Asian Currencies Tumble on Week, Led by Rupiah, Won, on Stocks (Bloomberg)
Nov. 21 (Bloomberg) -- Asian currencies headed for a weekly loss, led by Indonesia's rupiah and South Korea's won, as investors flee emerging markets to avoid risk from a deepening global economic slump.
High-yield Currencies In Demand As Stock Futures Rise (Fox News)
High-yield Currencies In Demand As Stock Futures Rise
Dollar rises against major currencies on weak data (Eastday.com)
The dollar rose against most major currencies yesterday as US unemployment claims increased and leading economic indicator fell. The US Labor Department reported yesterday that new applications for jobless benefits rose to a seasonally adjusted 542,000, from 515,000 in the previous week.
Currencies: High-yielding currencies under pressure; dollar, yen gain (Market...
High-yielding currencies like the Australian dollar and the British pound come under pressure as investors fret about declining stock markets and an unraveling world economy.