All traders will use forex charts at some point in their trading whether their primary analysis method is technical or fundamental. When you look at the forex charts you have to consider how they can be used on the volatile market. Volatile markets are the markets that most traders look at trading. These markets will affect the forex charts and what you see on them.
The Different Types of Forex Charts
There are many different types of forex charts and the ones you use depend on what you need. The most commonly used chart is the candlestick chart because of the amount of information it provides. Other chart types include dot charts, line charts and bar charts. Some of the charts are simpler and offer less information than others. However, some of these charts offer a faster view of a certain aspect of the market.
It is important that you know what you need to get from the charts when you choose which type you use. If you are looking to trade off the charts you may want to consider the candlestick chart because you get opening and closing information as well as the price. However, if you are looking for long-term price movement then you can consider the line chart.
The Impact of Market Volatility
Charts are able to give you insight into market volatility. A rule of thumb is that when the market is volatile the prices will fluctuate more. This means that you will be able to see trends in the market prices which are generally not found otherwise. There are other ways to determine market volatility, but charts are considered the best. Other ways of determining market volatility include looking at the market sessions. There are certain times of day when there are more traders on the market. When there are more traders the market becomes more volatile. However, this is not an accurate determination as there are times when the market does not become volatile.
Problems in Volatile Markets
There are certain issues that traders come across when the market is volatile. There are three which are considered the most common and the most annoying:
- Browser platform mayhem – some traders have found that during volatile markets their trading platforms do not work well. This is more common with retail traders who are using browser based trading platforms. When there are a lot of traders logged into the trading platform it can suffer a crash, much like a website that has too much traffic.
- Execution delays – when the market is volatile there are more traders on it which means great volumes of orders. Retail traders often suffer from poor order execution at these times. This can cause problems with your trading as you lose potential profits or the market turns before your trade is placed. Some forex brokers are more likely to execute poorly and you should look at this when you search for your broker.
- Incorrect quotes – as the price movements change rapidly in volatile markets you could get incorrect quotes. The price that your trade is executed at may not be the same as the quote you are getting. This is due to slow execution and the fast changes in prices.