EURO.uz -The Forex quick guide for beginners and private traders

| Forex | Форекс
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The Forex quick guide for beginners and private traders


Charts and diagrams

Forex charts are based on market action involving price. Charts are major
tools in Forex trading. There are many kinds of charts, each of which helps to
visually analyze market conditions, assess and create forecasts, and identify
behavior patterns.

Most charts present the behavior of currency exchange rates over time. Rates
(prices) are measured on the vertical axis and time is shown of the horizontal
axis.

Charts are used by both technical and fundamental analysts. The technical
analyst analyzes the "micro" movements, trying to match the actual
occurrence with known patterns. The fundamental analyst tries to find
correlation between the trend seen on the chart and "macro" events
occurring parallel to that (political and others).

What is an appropriate time scale to use on a chart?


It depends on the trader's strategy. The short-range investor would probably
select a day chart (units of hours, minutes), where the medium and longrange
investor would use the weekly or monthly charts. High resolution charts
(e.g. - minutes and seconds) may show "noise", meaning that with fine details
in view, it is sometimes harder to see the overall trend.

The major types of charts:

 Line chart

Charts and diagrams The Forex quick guide for beginners and private traders

The simplest
form, based upon
the closing rates
(in each time
unit), forming a
homogeneous
line. (Such chart,
on the 5-minutes
scale, will show a
line connecting all
the actual rates
every 5 minutes).

This chart does not show what happened during the time unit selected
by the viewer, only closing rates for such time intervals. The line chart
is a simple tool for setting support and resistance levels.


 Point and figure charts - charts based on price without time. Unlike
most other investment charts, point and figure charts do not present a
linear representation of time. Instead, they show trends in price.

Increases are represented by a rising stack of Xs, and decreases are
represented by a declining stack of Os. This type of chart is used to
filter out non-significant price movements, and enables the trader to
easily determine critical support and resistance levels. Traders will
place orders when the price moves beyond identified support /
resistance levels.

Charts and diagrams The Forex quick guide for beginners and private traders

 

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