When you look at technical analysis you need to consider the different forex charts that you can use. Each of the forex charts will have benefits and drawbacks that you need to know about. There are some commonly used forex charts that you should consider before you actively trade on the forex market.
What Line Charts Offer
Line charts plot one value such as the closing price for a particular time period. The charts are displayed in different ways. A continuous line may appear as a splinter, steep line or angled line. It can be plotted as individual points on the chart. Another method is to use a vertical line for each specified time period, or a vertical bar may be used for each interval.
What Bar Charts Offer
Bar charts indicate the open, low, high and closing prices for each particular interval that has been set. A vertical line is used to join the high values with the low. A dash to the left of it indicates an open and a dash to the right of it show the close. In cases where the high and low are on the same price level, a hyphen will be displayed.
What Candlestick Charts Offer
Candlestick charts were first used by the Japanese to analyse rice contract prices. It displays open, high, low and the closing prices in a manner that is similar to those of the bar chart. The charts are simply a different way of viewing the information and it requires no calculations.
What Point and Figure Charts Offer
High and low point and figure charts are similar to the analyses except that the analyses use low and high prices rather than closing prices. The most common uses for this type of chart is to identify trends, generate buying and selling signals, and identify support as well as resistance areas.
The Patterns on the Forex Charts
The construction of charts is the first step in practicing technical analysis. By the formation of the chart an analyst is identifying the patterns and shapes in order to be able to forecast the direction or trend that the market will take in the future. The chart is a method of displaying the price data of this financial market. Forex charts will indicate the expectation of the prices, but the traders will ultimately make the final decision regarding the exact time to purchase or sell. Charts aid traders in making that decision.
The trading markets generally do not move in a straight line. The trends are normally up and down. The up and down trends will normally resemble successive waves of with the peak and troughs becoming obvious. It is these ups and downs that set the trend to allow traders to undertake profitable trades.
The Use of Trend Lines
Trend lines join two points. If there are successive points that do not break through the line of the chart it can be interpreted as the direction the trend is taking. The basic concept of a trend is that it remains in motion. As long as that line is not interrupted, it is possible to determine the most appropriate purchasing and selling points.