How to Read the 5 Forex Charts: A Beginner’s Guide

technical analysis

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The time period is expressed in intervals along the Y-axis and the exchange rate is charted along the X-axis. Forex traders have developed several types of forex charts to help depict trading data. Traders use several metrics to read the market graph, but at its heart, it holds two essential bits of information – value and quantity.


You need to know how to follow charts no matter what commodity you’re trading. Analyzing trading charts is crucial in this field; you will eventually become a good trader with time and practice. A colored or filled middle block means that the closing price of a currency pair is lower than its opening price. On the other hand, when the middle block has a different color or it is unfilled, then it closed at a price higher than the one it opened. It pictures the activity of trades going on for the duration of a particular trading period notwithstanding the duration whether in minutes, hours, days or even weeks. For example, if you’re adding up the closing prices from a period of five hours, dividing that total by five would give you the simple moving average line.

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Although the same four values are also found in Western-style bar charts, the bar chart uses horizontal lines on the sides of a vertical line to project the opening and closing prices. But, a series of Candlesticks on a chart can help traders identify the character of price action more definitively, which helps in the decision-making process. By understanding the different types of charts and how to interpret them effectively, you can gain valuable insights into market trends and price action. Remember to always look for patterns within the context of the overall trend and to use multiple indicators to confirm your analysis. With practice and experience, you can become a skilled chart reader and improve your trading results.

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Anything other than past prices and volume details is nothing other than speculation. Yet, these halves of knowledge are crucial to anticipate possible price movements. Volume shifts are often ignored, but growing volumes indicate a much more substantial change, one that is likely to persist, whereas declining volumes display a lack of confidence among traders. Going back to the 17th century, the Japanese started to use a scientific method for the trade-in rice known as technical analysis. It is fascinating that Japanese candlesticks are widely used even today. The data reflected from the candlestick involves low, high, close, and open values.

Ready to trade forex?

After performing one of the two actions described above, you will get a new chart displayed that represents the price action of the chosen currency pair. If you don’t like the style of the new chart, don’t worry, we will teach you in a section below on how to customize your chart and create your favorite template. Between 74-89% of retail investor accounts lose money when trading CFDs with this broker. Traders can identify corrections by looking for a temporary reversal in the price movement of a currency pair. For example, if a currency pair is experiencing a bullish trend, a correction would involve a temporary decrease in price before the trend resumes.

  • In this market theory, prices move in 5 waves in the direction of a trend, while they typically correct that trend in three waves.
  • Each chart type has its own advantages and disadvantages, but most traders prefer candlestick charts due to their visual appeal and ability to provide more detailed information.
  • Some traders consider the closing level to be more important than the open, high, or low.
  • If your picture seems incomplete, you can adjust your time period to capture a larger period.
  • Andrew Lokenauth is a Finance Executive who has over 15 years of experience working on Wall St. and in Tech & Start-ups.

Each candlestick on a candlestick chart represents a specific time period and displays the opening and closing prices, as well as the highs and lows. We’ll also discuss some of the most popular technical indicators used by traders to help predict market trends. Consolidation can be frustrating for traders, as it can be difficult to predict when the currency pair will break out of the range and begin trending again.

A beginner’s guide to Forex charts

Moreover, mastering Forex charts will allow you to become an efficient and profitable trader. The high and low price points are then represented by a thin line extending from the top and bottom of each bar – the “wick” of the candle. Furthermore, a candlestick chart bar will usually be priced green if the closing price of a currency pair is above the opening price, or red if the closing price is below the opening price. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. One of the key concepts in forex trading is the idea of support and resistance.

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In f 5, we can see two different Candlestick patterns triggering two different trades. On the first occasion, the Engulfing Bearish Candlestick pattern appears during a downtrend that provides traders with a trend continuation signal. On the second occasion, a Three White Soldiers Candlestick pattern emerges at the bottom of the downtrend, which triggers a new bullish trend. However, on this instance, the market was already trading in a range for several days. As you may know, when the market consolidates for a while, it is basically setting up to breakout in one direction or the other. The formation of this bullish Candlestick pattern provided a signal as to of which way the market was about to break.

How to Read a Bar Chart

Technical analysts often use forex charts in combination with technical indicators they compute. This comes from the exchange rate as well as other market observables like the open interest and traded volume for futures contracts. Learn how to you learn exactly what this means and how to read forex charts below. Line charts don’t show as much detail as either candlestick charts or bar charts.

In the first step, traders determine breakout move on a forex chart where a new high or low is made, and resistance or support is broken. Then, traders draw a trendline as diagonal support or resistance level on a price chart. Finally, traders can confirm trends using moving average indicators or seek logical confirmation of a movement based on macroeconomic parameters. Candlestick charts are very similar to bar charts, in that they give you the high and low price for each trading day as well as the opening and closing price of a currency pair. In candlestick charts, the open and close price is usually represented by a box or thick bar – the “body” of the candle. Reading forex charts is an essential skill for any trader looking to succeed in the forex market.

The buffett rules of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 75% of retail client accounts lose money when trading CFDs, with this investment provider. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. Simply said, the timeframe of the chart determines which data the candlesticks use for their graphical representation. Shorter timeframes basically “zoom in” the price action of longer timeframes. The following chart shows how the 4-hour timeframe zooms into the daily.


However, you might find that one particular type of forex chart is easier to read than another. Let’s go through the main types of forex charts so that we can better understand the benefits of each. Point and figure charts are useful for identifying support and resistance levels, as well as trends and reversals. Line charts are useful for identifying key levels of support and resistance, as well as basic trend analysis.

Mountain chart

Any financial asset with price data over a period of time can be used to form a chart for analysis. Formation of a simple or complex Candlestick pattern during such market condition confirms and verifies the impending contrarian price action for the trader. Placing their order in the market using this combination of technical factors can significantly improve the accuracy of their trades.

The bearish engulfing is a green candle followed by a red candle pattern which represents a strong shift in sentiment in the market. Essentially, a candle totally engulfs the previous candle’s high to low price range suggesting a continuation to the downside is likely. The bearish harami is a green candle followed by a red candle pattern which represents indecision in the market and the possibility of a breakout from it. These are also called ‘inside candle’ formations as one candle forms inside the previous candle’s high to low price range.

For example, the Bullish Harami requires two Candlesticks, the Three White Soldiers pattern requires three Candlesticks, and the Bullish 3 Method formation requires 4 candles. We will further discuss the importance of location of Candlestick patterns in some example trades later. These statistical metrics can help you learn whether stocks are oversold or over-purchased.

If you are ready to start trading Forex on CFDs, the Admirals live account is the perfect place for you to do that! Trade over 40 CFDs on currency pairs, choosing from a range of Forex majors, Forex minors, and exotic currency pairs, with access to the latest technical analysis and trading information. These are just some of the patterns you can typically find on candlestick charts.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Forex charts come in different forms, but the three most popular types of chart are line charts, bar charts and candlestick charts.

They can be viewed in different price increments and can be used for both short-term and long-term trading strategies. The high and low prices are represented by the top and bottom of the bar, respectively. To access live Forex charts on TradingView, simply create a free account and select the Forex pair you want to track.

This is a very simple way to display pricing data as it does not give any indication of what the high, low or open price for the period was. It simply connects the closing prices of periods with a line, and doesn’t take into account the opening, high, or low price as bar or candlestick charts do. Identifying market cycles can be useful when analysing forex trading charts, as they can help determine the overall trend or future directional bias of a market. Of course, it doesn’t tell us how many pips the market will move by but can certainly help form part of the picture when reading forex charts. As with candlestick charts and line charts, bar charts compare a single exchange rate between two different currencies. The rate tells you the amount of the second currency you could potentially buy for the first currency.