Typically, forex pairs are quoted to four decimal places (). The ‘1’, four spaces after the 0, is what is referred to as a pip. The number ‘7’ in red shows the decimal unit of a pip. If In the example above, we showed you a daily candlestick Forex chart. However, charts can also be represented on other timeframes, which can be as short as one minute and as long as a Estimated Reading Time: 6 mins Put simply, a forex chart is a chart or a graph that shows how the exchange rate of a currency pair, such as USD/EUR, has fluctuated and changed over time. It will usually show the 05/11/ · Many forex charts are set to a daily time span by default, showing you the trading data over a hour period. You can also select other time frames like minutes or months. 25/08/ · Graphers color the “body” of the candlestick, often either black or red, depending on how the pair moved throughout the day. For example, if EUR/CAD closed ... read more
Whenever it comes to answering a question about how to read Forex charts, beginners often get confused. The main reason for this is that the graphs themselves may seem difficult to navigate for those who have never dealt with them before.
But hopefully, just like any other part of the forex market , chart reading can be systemized and broken down into simple measures. In addition, the more you look at the chart analysis in the future, the clearer it will appear to you.
The major difference is the way information is displayed depending on the preferred data processing style of the trader, one chart style may be preferred to another.
The bullish candles are framed in terms of sketched shapes and appear on the graph when the closing price is above the opening point. And the bearish ones are filled with color and appear in the opposite scenario.
when the opening price is higher than the closing price. The bar chart may be slightly similar to the price action candlesticks , but it works differently. The bars appear like vertical lines of different lengths with horizontal outlines at the top and bottom.
Every bar represents the time period selected and the markings reflect the highest and lowest values during that time. The status of the bars compared to each other is a trend. example, if several bars are placed one higher than the other, the overall rate increase is indicated. Just like the candlesticks, studying bar charts is not too difficult as long as you know the fundamentals and pay close attention to them. In contrast to the candle and bar graphs, when reading the line graph, the trader will look at the graph as a whole rather than the separate elements.
It is very straight forward: based on the closing values of the selected currencies in the currency market , the line on the chart will represent the trends in the selected time periods. For a bearish candle, the highest line would be the opening price and the lowest line would be the closing. Learn the names of candlestick patterns with predictive value.
Part of what makes candlestick charts fun to read are the names given to different patterns. Once you learn to identify these patterns, you can more accurately predict which way the market is going to move for the pairing you're evaluating. Some patterns with predictive value are:  X Research source Big candles : A big candle body indicates a trend that is continuing for a longer period of time.
If you see a large bullish candle, you know the bullish trend is continuing for that pairing. A large bearish candle indicates a continuing bearish trend. A bullish candle might signal you to buy that pairing, while a bearish candle would signal you to sell. Doji candles : Doji candles have little to no candle body.
These indicate the market condition is neutral or tentative. Doji candles can tell you to hold off on either buying or selling that currency pairing. Place the patterns in context on the chart. Once you know how to identify types of candlesticks, look at their relative position on the chart. This helps you understand what that particular pattern is actually telling you about the way the market is moving.
If you see that candle at the top of an uptrend, it may signal that the uptrend is reversing. Method 2. Choose your currency pairing. Line charts don't show as much detail as either candlestick charts or bar charts.
However, they can be good for identifying overall trends in the relationship between the two currencies. You can also pull up line charts for several pairings to get a sense of the overall strength of a particular currency. Set your time period. Since you're typically looking at a bigger picture with line charts, you may want to set a longer time period for your line chart. The maximum length of time you can set depends on the service you're using to generate your chart. Determine which price you want to use.
Most line charts use closing prices as a default. However, depending on the service you use, you may be able to generate a line chart comparing another value, such as high, low, or opening prices. For example, you could compare a line chart of high prices with a line chart of low prices for the same period. Significant differences between the two lines would indicate volatility in the exchange rate for that particular pairing.
Evaluate the trend represented by the line. Unlike candlestick charts or bar charts, with line charts, you want to look at the chart as a whole. While you'll typically see many ups and downs as you move along the X-axis, pay attention to whether the overall trend is for the exchange rate to increase or decrease. For example, if you've noted a down-trend in the last 24 hours, you could check on the line chart to determine whether the lowest point is down overall, or coming down from a spike.
Method 3. Identify the currency pairing you want. 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. Unlike line charts, however, the bars are not connected to each other. Select your time period and intervals. The time period is represented by the Y-axis and is the entire period for which you're evaluating the exchange rate trend.
The interval is the period represented by each bar on your chart. Each bar would represent one hour and you would have 24 bars over the course of the day. The Y-axis would follow hour-long intervals so you could progress the movement of the exchange rate. Identify the high and low price for the interval. On a bar chart, the high price for the interval is the top of the vertical bar. The low price for the interval is defined by the bottom of the vertical bar.
For example, if the bars are moving steadily upwards, that indicates that the rate is increasing over time. Compare the opening and closing prices. A small horizontal line sticking out from the left side of the bar is the opening price. The small horizontal line sticking out from the right side of the bar is the closing price. By comparing their relative position on the vertical bar, you can determine whether the market was bearish or bullish during that interval. In contrast, a higher closing-price line indicates a bullish market.
Look for overall trends in the movement of the bars. Looking at your whole bar chart, you get a sense of the big-picture movement for the chosen currency pairing over the period you've selected. If your picture seems incomplete, you can adjust your time period to capture a larger period. Using a bar chart is particularly helpful if you want to look for gaps in the exchange rate. These are spots where the bar for the first period doesn't overlap any part of the bar for the second period.
Did you know you can get answers researched by wikiHow Staff? Unlock staff-researched answers by supporting wikiHow. wikiHow Staff Editor Staff Answer. Not Helpful 1 Helpful 4. Not Helpful 0 Helpful 1. Not Helpful 0 Helpful 4. Include your email address to get a message when this question is answered.
Some online brokerages have practice modules that allow you to use "fake money" to practice trading before you start using real money. Helpful 0 Not Helpful 0.
Watch currency pairings for a while to become familiar with their exchange rate movements before taking the leap to buy. Like any trading, Forex trading is risky. The foreign exchange markets are affected by political, social, and environmental factors that are difficult to predict or manage. Never invest more on Forex than you could afford to lose. Helpful 1 Not Helpful 0. You Might Also Like How to.
How to. More References 8. About This Article. Co-authored by:. Co-authors: Updated: July 25, Categories: Foreign Exchange Market. Article Summary X A Forex chart is a visual way to read price movements over a certain period.
In other languages Русский: читать свечи на Форексе. Bahasa Indonesia: Membaca Grafik Forex. Thanks to all authors for creating a page that has been read , times.
Wiseman Madolo Nov 9, Share yours! More success stories Hide success stories. Featured Articles How to. Trending Articles How to. New Pages.
Reading Forex charts is one of the first steps you need to learn in your trading journey. Fortunately, you are in the right place to understand how a line chart, a bar chart or candlestick chart works.
Moreover, mastering Forex charts will allow you to become an efficient and profitable trader. This post will teach you everything you need to know about reading Forex charts. We have also added some helpful tips so you can customize your own charts, which will enable you to be more productive and help accelerate your learning curve in Forex.
The first step is to go to your trading platform and open a chart. For practical purposes, we will use MetaTrader 4 as an example in this guide. Also, MT4 is the most recommended platform for getting started in Forex trading. However, the process below should be very similar if you are using MetaTrader 5 or a different trading platform.
To open a new chart, choose a currency pair on the Market Watch window, right-click it and then click the chart window option. Opening a New Chart in MetaTrader 4 using the MarketWatch.
Alternatively, you can click the button in the standard toolbar, which is usually located at the top right of the MetaTrader 4 window. Then, you can proceed to choose the currency pair:. Opening a New Chart in MetaTrader 4 using the toolbox button. 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. A Forex chart illustrates the price changes on a specific currency pair.
There are two axes: the vertical or y-axis represents the price, while the horizontal or x-axis depicts a time-lapse. Prices and Timeline Axis in Forex. This is how it looks in the MetaTrader 4 trading platform:. Prices and Timeline in MT4. As you can see in the image above, price action develops from left to right, so the most recent price information will appear on the right side of the chart.
The marks in the x-axis represent a specific time period that may vary depending on the timeframe you choose for your chart. To choose one of these options in MetaTrader 4, click one of the following displayed above, which are located in the standard toolbar:. Standard Toolbar in Mt4. A bar chart is formed of a vertical line and two horizontal lines. The extremes of the vertical line represent the lowest L and the highest H price levels for a determined period.
The two horizontal lines describe the open O and the closing C price levels, respectively. In the example below, you will notice how a bar chart can illustrate the price action of a day D2 :.
Anatomy of a Forex Bar chart. Most of the time, bar charts have different colors depending on their nature: if they are bullish or bearish. Bar charts and color meaning. If we add a box shape to the OHLC bars, we get a candlestick bar as a result.
Instead of one vertical and two horizontal lines, we have a rectangular bar. The rectangle symbolizes the body of the candle. Depending on the color, the start and the end of the body represent the open or the close price of the bar. Anatomy of a Candlestick Chart. If the candlestick body is green or hollow with the same color as the chart background , then it is bullish.
Also, the candle usually has two lines attached: a shadow and a wick — the extremes of these extensions depict the highest and lowest price in a period. Candlestick bars are also known as Japanese bars, due to their origin and because of the market theory that surrounds this type of chart.
They are the most popular type of chart among Forex traders because candlesticks form patterns that can be interpreted as market signals to buy or sell a currency trade. Its massive adoption is mainly due to the information they can condense when being displayed.
Last but not least, we have the line chart, which is a simplified depiction of the price action in comparison to the bar and candlestick charts.
The reason for this is that it only shows and connects closing prices of specific periods. Anatomy of a Line Chart. The first element you can identify is the chart timeline: it is the X or horizontal axis located at the bottom of any chart and connects time periods depending on the timeframe you select to perform your market analysis minutes, hours, weeks or months. It is important to mention that, when reading the timeline, the more to the left you go, the oldest the period you will see. In contrast, going to the right you will notice new periods.
The price levels are depicted on a Y or vertical axis, on the right side of the chart. The values will depend on the currency pair you want to analyze. However, they all move in units called pips. You should keep in mind prices increase from bottom to top.
This has the following implications when you read the prices in conjunction with the timeline:. You will notice there is a line element in the chart that constantly moves and draws the price action as time passes by. This line is called the price line and it illustrates the current Bid price of a currency pair. Also, it is key to clarify that, in Forex, you always have two types of prices: the Bid and the Ask.
If you would like to buy a currency pair, you will be quoted at the Ask price. On the contrary, if you want to sell a currency pair, you will need to use the Bid price. You can display both price lines in MetaTrader 4 b y right-clicking a chart and selecting properties or simply press F8. Then select the Common tab and check the Show Ask Line option and click OK. The gap you will see between the Ask Line and the Bid Line is the spread, or the commission your broker makes for every trade you place.
This gap will vary depending on the currency pair and its liquidity. There are different time frames you can select in a Forex chart. You will find the following options in MetaTrader To select or change the time frame of a chart, click the button located in the MT4 standard toolbox:.
Alternatively, you can right-click the chart and select the period you want to display:. Using charts with different time frames can help you to build a more robust analysis of the market and gain a thorough perspective of the overall trend in a specific currency pair. This could be helpful before starting a trade. For instance, if your technical analysis in an H1 chart signals you should place a buy or long order and, when checking the daily chart you see the overall trend of the currency pair is sideways, it means the downside movement could be limited.
Analyzing Multiple Timeframes. When reading Forex charts, it can be handy to create your own chart templates that will allow you to save time in your analysis and fulfill your preferences. You can customize your charts in MetaTrader 4 by following these simple steps:.
You will get the following window displayed, where you can adjust different chart elements:. You can save a chart template on MetaTrader 4 with your preferred settings by right-clicking the chart and selecting the save template option. Then, give it a name and click save. Saving a Chart Template in MetaTrader 4. To load your chart template with your preferences in a new Forex chart, open a new chart in MT4, then right-click it and select the load template option.
Then choose your template. Loading a Chart Template in MetaTrader 4. We hope that this guide helped you to understand better how to read and customize Forex charts in MetaTrader 4. If you have any feedback or questions, please post them in the comments section. Your email address will not be published. Forex Charts in MT4: How to Read and Master Them Muhammad Awais April 1, No comments. To read a Forex chart you should: Open a chart in your trading platform MetaTrader 4, for instance Choose a chart type: A line chart, a bar chart or a candlestick chart Understand the price points and levels that are displayed in the chart Identify the chart timeframe: This could go from a 1-minute chart to a monthly chart.
Opening a Chart in MetaTrader 4 The first step is to go to your trading platform and open a chart. Opening a New Chart in MetaTrader 4 using the MarketWatch Alternatively, you can click the button in the standard toolbar, which is usually located at the top right of the MetaTrader 4 window. Then, you can proceed to choose the currency pair: Opening a New Chart in MetaTrader 4 using the toolbox button 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.
Choosing a Forex Chart Type Basic Elements of a Forex Chart A Forex chart illustrates the price changes on a specific currency pair. Prices and Timeline Axis in Forex This is how it looks in the MetaTrader 4 trading platform: Prices and Timeline in MT4 As you can see in the image above, price action develops from left to right, so the most recent price information will appear on the right side of the chart. Types of Forex Charts In addition, there are three main types of Forex Charts: Bar Charts Candlestick Charts Line Charts To choose one of these options in MetaTrader 4, click one of the following displayed above, which are located in the standard toolbar: Standard Toolbar in Mt4 How to Read a Bar Chart A bar chart is formed of a vertical line and two horizontal lines.
In the example below, you will notice how a bar chart can illustrate the price action of a day D2 : Anatomy of a Forex Bar chart Then, multiple days take the following shape: Most of the time, bar charts have different colors depending on their nature: if they are bullish or bearish. Green: represents bullish or buyer bars, meaning the close price is at a higher level in comparison to the opening price. Red: represents bearish or seller bars, meaning the close price is at a lower level in comparison to the opening price.
Bar charts and color meaning How to Read a Candlestick Chart If we add a box shape to the OHLC bars, we get a candlestick bar as a result. Anatomy of a Candlestick Chart If the candlestick body is green or hollow with the same color as the chart background , then it is bullish. How to Read a Line Chart Last but not least, we have the line chart, which is a simplified depiction of the price action in comparison to the bar and candlestick charts.
It might be difficult to perform technical analysis and identify patterns that materialize into a trading strategy. Candlestick Chart It is the most robust representation of the price action, as it not only shows all the key levels for a specific period, but it also allows us to identify patterns and deploy technical analysis tools in a more effective way. It can fall short when you are trying to assess the overall market trend.
Different to bar charts, you depend on colors to identify if a bar is bullish or bearish.
29/11/ · Most of how to read Forex charts beginner’s PDF manuals will start with the candlestick charts. The main thing you need to know about the candles in Forex is whether the 16/02/ · Welcome to video #7 of Forex Trading for Beginners — how to read a Forex chart. This is a free (step by step) trading course that teaches you the essentials of Forex 05/11/ · Many forex charts are set to a daily time span by default, showing you the trading data over a hour period. You can also select other time frames like minutes or months. 25/08/ · Graphers color the “body” of the candlestick, often either black or red, depending on how the pair moved throughout the day. For example, if EUR/CAD closed 01/04/ · To read a Forex chart you should: Open a chart in your trading platform (MetaTrader 4, for instance) Choose a chart type: A line chart, a bar chart or a candlestick chart In the example above, we showed you a daily candlestick Forex chart. However, charts can also be represented on other timeframes, which can be as short as one minute and as long as a Estimated Reading Time: 6 mins ... read more