The sum number of variables related to FX and trading in it are innumerable. However there are a few major variables which are related to finance and economics and directly responsible for market trends. These variables are often summed up in the forms of charts. Thus, to understand, interpret and apply the know-how, forex chart analysis is an important tool to have in mind for any would-be forex trader.
Forex is deceptively intelligible
Forex means trading between two currencies as per their value ratios. And although FX is an increasingly volatile market with a high liquidity, i.e. simply put, it’s very variable. There are many variables which affect each price quote; and accounting for each of them is well-nigh impossible. So, for an FX trader, making sure that those which can be accounted for are covered is what, to some extent, guarantees a profit.
But to a beginner, understanding an Elliott wave graph or a MACD line is not possible. What every beginner needs to do, after getting their basics in FX straight, is do a comprehensive detailed study of these technical analysis tools and indicators. There are numerous such tools which appear unintelligible at first but are simple to interpret once the individual is in vogue with them.
So, for any individual who is looking to start up, the singular foremost advice would be to study up with their wits about and convincingly. One always learns alphabets and then the words to use them with and not the other way around. The same applies for forex chart analysis.
If Forex trading is a book, then forex chart analysis is the language of the writer who in this case is the sum collective of investors who trade in forex. In a market where $13 million are spread about every second, charts which graph these huge dispersals of cash are important both as a logbook and also in understanding future market movements.
Every trade on a currency pair accounts for an effect upon the price quote which it has given that it amounts to somewhere near the per/second mentioned above. Pre-anticipating the price quote movement thus requires pre-anticipating the trades upon that pair. And this is how FX traders on a daily basis use charts and graphs to interpret and speculate on future market movements.
For a beginner, forex chart analysis, i.e. forecasting market trends with the help of FX charts will take some time and experience. To try their hand out in applying the so far gathered know-how, beginners can always opt for demo FX accounts. Experience is something that cannot be learnt from reading or studying per se.
Different forex chart analysis forms:
The most commonly used and viewed FX charts are those which graph the price movements with respect to the time. They are of the following variables:
- Candlesticks Charts
- Bar Charts
- Mixed Charts
There are certain other types of FX charts which are based on other data. The data summed up is analyzed in as per the respective theory relating to market trends. E.g. an MACD technical graph employs time on one axis trend and value of an asset on the other.
Forex chart analysis is a requisite for any FX trader, beginner or expert alike. Understanding them may prove difficult at first but for those who do get the whole picture of it, a lump sum profit is a guarantee.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.