Learning to read the forex charts is important if you want to succeed in the foreign exchange market. When you learn how to read the charts you may be able to develop a complete trading plan so that you are able to trade successfully in this volatile market.
The many popular chart patterns available in the forex market include flag, resistance, trend, wedge, pennant, gap, price channel, rectangle, head and shoulders, breakout, double top, double bottom, triple top, triple bottom, rounding top, rounding bottom, ascending triangle, symmetrical triangle and descending triangle.
Different types of forex charts
The triple top chart pattern can be identified by the three consecutive highs that you see recorded on the charts. These consecutive highs are about the same height and you may be able to see two moderate pullbacks wedged between the necklines.
The rectangle chart pattern describes a price and continuation pattern where the supply and demand are balanced equally for a longer period. The resistance level can be seen at the top of the rectangle and the support level at the bottom. You may be able to see a reversal in the uptrend when you look at the head and shoulders chart pattern. This chart pattern consists of a head, two shoulders and neckline.
The symmetrical triangle pattern creates a triangle on the chart when the highs and lows of a currency converge on the same point. Traders drawing a symmetrical triangle chart know that the market is consolidating and use this information to place a trade. This chart is a clear indicator of how the market may move in the future.
The double top and bottom charts are known as reversal patterns. In the double top chart there are usually two price peaks and the price does not exceed these peaks. Similarly, in a double bottom chart there are lows and the price does not fall below these lows. You can make use of these charts to place a trade successfully.
Tips for utilising forex charts
Forex charts are considered the best tools for providing direction of trading to both new and experienced traders. You may be able to get detailed information about what is happening in the forex market when you look at the charts. The data feeds that you see on these charts are live and these can help you know the currency exchange rates immediately.
The price movements that you see on forex charts are uptrends, downtrends and sideways movements and you may be able to see the highs and lows of currency pairs. The directions that you see on the charts form support and resistance levels and these can be used by traders to place a trade.
One of the things that you need to remember is that trends keep changing rapidly. You also need to focus on the time span of a chart so that you are able to time your trade in an effective manner. The correct momentum of the market can also be found when you use a chart for analysis.