An overlay forex chart is a type of forex chart in which two charts of two currency pairs are overlayed for the main purpose of studying them together. Remember that forex charts are usually displayed in currency pairs, i.e. USD/AUD, CHF/EUR, USD/CHF and the list goes on and on.
Most often than not, the forex charts usually gives the trader information about the currency pair under review but does not include a give a forum for the trader to put two currency pairs side by side in order to study them. in the forex market, an overlay forex chart is very important since it grants the forex trader the rare privilege of being able to put two currency pairs side by side in order to see how the values can be affected by each other. For instance, the forex chart of USD/AUD can be overlayed with that of USD/EUR to see the possible difference in price and how the markets trends in one is affected by the other.
USES OF OVERLAY FOREX CHARTS
The following are the uses of the overlay forex charts and why they are needed in the forex market.
1. THEY ARE USED TO STUDY THE MARKET TREND OF THE CURRENCIES
Without an overlay forex chart, it is quite difficult to correctly study the market trends on two currency pairs on the same chart. The overlay forex chart program gives the trader the rare privilege of easily carrying out this function.
2. TO COMPARE AND CONTRAST THE MARKET PRICES
Forex trade is all about the market prices which come in the form of exchange rates. These rates are the factors which determine if the trader will make some profits or loss at the end of the day. One good thing about forex prices is that they are affected by each other. An up price in one currency pair can either lead to a down or up in another currency.
3. TO PREDICT THE FUTURE OF THE TWO PAIRS
Studying the currency pairs by juxtaposing their price will also help the trader in terms of predicting the future of the two currencies in the market and how well they can be traded for a maximum benefit. Forex trade is all about prediction of prices and the overlay forex chart can easily give the trader a clue on the possible future prices.
4. TO KNOW HOW THE ONE CURRENCY PAIR AFFECTS THE OTHER
The trader, by overlaying the two currency pair charts can easily understand how they are affected by each other in the market and will also know how to trade in them better.
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