Forex
Trading Price charts
can be simple line graphs, bar graphs or even
candlestick graphs. These are graphs that show prices
during specified time frames. These time frames can be
anywhere from minutes to years or any time interval in
between.
Forex
Trading Line charts
are the easiest to read, they will show you the broad
overview of price movement. They only show the closing
price for the specified interval, they make it very easy
to pick out patterns and trends but do not provide the
fine detail of a bar or Forex Trading candlestick
chart.
With
a Forex Trading bar chart the length of a line
displays the price spread during that time interval. The
larger the bar is the greater the price difference
between the high and low price during the interval. It
is easy to tell at a glance if the price rose or fell
because the left tab shows the opening price and the
right tab the closing price. Then the bar will give you
the price variation. When printed Forex Trading bar
charts can be difficult to read but most Forex
Trading software charts have a zoom function so you
can easily read even closely spaced
bars.
Originally
developed in Japan for
analyzing candlestick contracts candlestick charts are
very useful for analyzing FOREX prices. Forex
Trading Candlestick charts are very similar to
Forex Trading bar charts they both show the high,
the low, open and close price for the indicated time.
However the color coding makes it much easier to read a
candlestick chart, normally a green candlestick
indicates a rising price and a red one indicates a
falling price.
The
actual candlestick shape in reference to the
candlesticks around it will tell you a lot about
the price movement and will greatly aid your analysis.
Depending on the price spread various patterns will be
formed by the candlesticks. Many of the shapes
have some rather exotic names, but once you learn the
patterns they are easy to pick out and
analyze.
Forex
Trading Price charts
are not usually used by themselves to get the full
affect you need to supplement them with some Forex
Trading technical indicators. Technical indicators
are normally grouped into some pretty broad categories.
Some of the more common ones used to monitor and track
the Forex Trading market movement are: trend
indicators, strength indicators, volatility indicators,
and cycle indicators.
To get Forex
Trading Free charts Software please visit
http://www.forextradings.biz
Here
is a list of some of the more commonly used indicators
as well as a brief
description:
Average Directional Movement Index
(ADX)
– This index will help indicate if the market is moving
in a trend in either direction and how strong the trend
is. If a trend has readings in excess of 25 then this is
considered a stronger trend.
Moving Average Convergence/Divergence
(MACD)
– This shows the relationship between the moving
averages which allows you to determine the momentum of
the market. Any time that the signal line is crossed by
the MACD it is considered to be a strong
market.
Stochastic Oscillator
– This compares the closing price to the price range
over a specific time frame to determine the strength or
weakness of the market. If a currency has a stochastic
of greater than 80 it is considered overbought. However
if the stochastic is under 20 then the currency is
considered undersold.
Relative Strength Indicator
(RSI)
– This is a scale from 1 to 100 to compare the high and
low prices over time. If the RSI rises above 70 it is
considered overbought where as anything below 30 is
considered oversold.
Moving Average –
This is created by comparing the average price for a
time period to the average price of other time
periods.
Moving
Averages Basics
Among
the important concepts a new forex trader should
know is what a Moving Average means, how this
indicator is calculated and its use as a trading
tool.
A
“Moving Average” is a technical indicator
that shows the average value of a particular
currency pair over a previously determined period
of time. This means, for example, that prices may be
averaged over 20 or 50 days, or 10 and 50 min depending
on the time frame that is more convenient for you at the
moment of your trading activity.
Moving
Averages
are an averaged quantity and can bee seen as a smoothed
representation of the market activity at the moment and
it’s an indicator of the major trend influencing the
market behavior.
This
smoothing effect of the Moving Average is very
helpful when the trader is looking for getting rid of
the “noise” in the price fluctuations of the currency
pair he is trading at the moment and a more precise
emphasis in the trend direction is
required.
The
mechanics of how Moving Averages can tell a
forex trader where the forex Trading
market is moving (up or down) is by considering two
different time frame Moving Averages and then plotting
them on a forex chart. It is very important that
one of these MA is over a shorter time period than the
other one; let’s say one will be over a 15 days period
and the other over a 50 days
period.
Once
you have plotted the two Moving Averages with
your Forex Trading charting software (available
from most internet forex Trading brokers), you
will notice points of crossover where the shorter time
period MA will cross above the longer time period MA
indicating an upward trend in the Forex Trading
market, or if the crossing is below the longer period MA
that will be an indication of a down trend in the
forex Trading market.
So
by using this simple concept of the Moving Averages you
can start understanding the basics of confirming trends
when checking your forex trading charts during
your particular trading hours.
Moving
Average Convergence Divergence
MACD is a
more detailed method of using moving averages to
find Forex trading signals. This indicator was
developed by Gerald Appel, the MACD plots
the difference between a 26-day exponential moving
average and a 12-day exponential moving average. A 9-day
moving average is generally used as a trigger line,
this means that when the MACD crosses below this trigger
it is a bearish signal(time to sell) and when it crosses
above it, it's a bullish signal (time to
buy).
This
indicator will help the Forex trader using
MACD studies to have an early signal of what the
Forex market will do next. When the MACD
turns positive and makes higher lows while prices are
still tanking, this is usually a strong buy signal.
Conversely, when the MACD makes lower highs while prices
are making new highs, this could be a strong bearish
divergence and a sell signal.
The
other indicator, RSI, stands for Relative
Strength Index. The RSI indicator measures
the markets activity as to whether it is over bought or
over sold. It gives a Forex trader an indication
of which way the Forex Trading Market is moving
at the moment. It is important to note, that this is a
leading indicator and thus allows one to see what the
market is about to do next and then act accordingly in
order to have gains. The higher the RSI number,
the more over bought it is and conversely the lower the
RSI number, the more over sold it is. It is a
great leading indicator for the micro and macro
reversals in the forex Trading
market.
This
Forextechnical indicator was developed by
Welles Wilder to help investors gauge the
current strength of a stock's price relative to its past
performance. The usefulness of this indicator is
based on the premise that the RSI will usually
top out or bottom out before the actual market top or
bottom, giving a signal that a reversal or at least a
significant reaction in stock price is
imminent.
The
main purpose of the RSI is to measure the
market’s strength and weakness. A high RSI,
above 70, suggests an overbought or weakening bull
market. Conversely, a low RSI, below 30,
implies an oversold market or dying bear
market.
But
RSI does not indicate a top or a
bottom.
Sometimes overbought market will be followed by little
downward correction in order to gather momentum so it
could go up much further. And sometimes oversold market
will be followed by little upward correction in order to
gather momentum so it could go down much
further.
To get Forex
Trading Free charts Software please visit our directory
page or http://www.forextradings.biz
Japanese
candle sticks
Japanese
candle sticks
are the most animated way to observe price movement. It
records the price movement on Forex charts in
effect drawing a clear picture for Forex traders
to study. Japanese candle sticks also known as
sign language of the Forex market. In
candlestick charts, as in many other
charts, you get the open, close, high and low of
the online Forex prices.
One
of the biggest advantages of Forexcandlestick
charts is when you only take a glance; you can
observe a lot of information about the online Forex
currency movement. Most importantly, you can notice
the difference between the open and close prices of the
online Forex. If you notice a red
candlestick, it can serve as a warning about the
direction of the currency price. The fat red
section is the body of that Forex candlestick.
The lines protruding from the top and bottom are the
upper and lower wicks. The very top of a candles wick is
the highest price for that candle while the bottom of
the wick is the lowest price for the
candle.
Forex
Candlestick charting
is great for Forex traders wanting an extra edge
in their quest for profits - this is due to the way the
candle bodies are drawn, that gives a better insight
that is visual, and shows Forex trader
psychology.
More
Forex traders than ever are using Forex
candlestick charts due to the extra trading edge
they can get with this form of Forex charting -
if you have not used them before, then this article is
for you.
Forex
Trading Candlestick charts
are not new, and have been used for hundreds of years by
Japanese traders to predict and act on market
movements.
Forex
Trading Candlestick charting giving
greater insight into human
psychology
In
the 1700's, Homma, a Japanese trader in
rice, noticed how the price of rice was influenced by
human psychology as much as the supply and demand
situation. Homma used candlestick
charts to trade rice and amassed a huge fortune in
the markets. In fact, it was rumored he never to have
had a single losing trade!
Human
psychology has never changed, and has remained constant
over time – Forex Trading candlestick charting is
therefore just as useful today, as it was hundreds of
years ago.
The
Re-emergence of Candlestick
Charting
Steve
Nison, book, "Japanese charting techniques,"
bought candlestick charting back into the public
domain in the 1990s. Currency traders soon
started using Forexcandlestick charting instead
of Forexbar charts for greater insight into
market movements
To get Forex
Trading Free charts Software please visit our directory
page or http://www.forextradings.biz
So why use Candlestick
Charts?
1.
They complement other Technical
Tools
You
can use Forex candlestick charts as you would use
the common Forexbar chart, and you can combine
them with traditional market indicators.
ForexCandlestick charts are a great way to spot
opportunities, and then filter, and time trades with
other indicators.
2.
Spotting trend changes
Because
of the way Forexcandlestick charts are viewed,
they can give warnings of market reversals, far more
visually than traditional bar charts. If you look at
candlestick charting, the human psychology of the move
literally jumps out the page at
you.
3.
Straightforward to use
Forex
Trading Candlestick charts
use, the same open, high, low and close data that
traditional Forex Trading bar charts use, and are
easy to draw. In addition, there are many packages like
super charts and trade station that will draw them
automatically for traders. The different candle names
are also easy to remember.
4.
Define market momentums
The
way the Forex candlestick chart is drawn not only
gives the direction of price, but also the momentum
behind the move. The Forex Trading candlestick
chart graphically illustrates the relationship behind
the open, high, low, and closes by the body - and adds
an extra visual edge, due to the way they are
drawn.
The
Forex Trading candlestick has a wide part, called
the "real body." This real body represents the range
between the open and close of that day's trading. When
filled in black, the real body means the close was lower
than the open.
If
the real body is empty, it means the opposite - the
close was higher than the open.
Above
and below the real body we see the "shadows." We see
these as the wicks of the candle (which give them their
name), and the shadows actually show the high and the
low of the day's trading.
A
Visual Aid to Give You an Edge
Forex
Trading candlestick charts should
be used rather than traditional bar charts because they
give you an extra visual
dimension.
Regardless,
of whether you are a Forex day trader,
Forex position trader, Forex system trader
or a Forex trader who likes to make your own
trades, there is really nothing to dislike about
candlestick charts!
Easy
and fun to use, and providing a greater insight into
Forex market moves, along with the ability to use
in any type of Forex trading, means if you aren’t
already using Forex Trading candlestick charting,
then its time to start.