For becoming a successful forex trader, it is imperative to learn reading of forex charts. It’s a significant skill that all forex traders must acquire for better analyzing of price movements in a given time period for making more accurate predictions of market movement. Before telling you the ways of reading charts, you should at the outset read the fundamentals of currency pairs at XFR Financial LTD to be able to read forex charts with no misunderstanding.
Fundamentals of Currency trading
The fundamentals of trading currencies will be helpful in reading the rest of this article. You should understand that every currency pair is quoted in the same manner all through the transaction. For instance, when you opt to go for a £/USD as your preferred currency pair for trading, it’ll be expressed as a £/USD pair at all times with £ as the base currency while USD is the termed currency. This sequence will not change in any way. So, if £ /USD chart shows a current price of 1.2, it would always imply that one £ can buy you nearly 1.2 USD and certainly not the other way round.
Likewise, the trade size reflects the sum of base currency that you trade with XFR Finance Ltd. For instance, a trade size of 100 £/USD would mean procuring of £ 100. Now we can go ahead with reading of certain significant tips for reading forex charts:
Helpful tips from XFR Financial Ltd for reading charts
- When you buy base currency of a currency pair, it implies that that you are willing to go long and you’ll be watching the chart of that currency pair in anticipation of its going up to make it a profitable trade for you. In other words you would like the base currency of the pair to become stronger than the term currency. Conversely, when you sell that currency pair, it implies you are taking a short position and you would like the chart of chosen pair to go down enabling you to make profit. In other word, you would like the base currency to become weaker.
- Don’t ever lose sight of the time period included in the referred chart and be aware that different trading systems employ different time periods for deciding the time frame of their chart. For instance, many use four hour chart for deciding the general trend of a given currency pair by employing indicator such as MACD, support, resistance lines and momentum. Therefore, always make sure that the time period included in the chart is appropriate for your analysis.
- Majority of forex charts display the bid price and not the ask price. You should also know that a price is forever quoted with an ask price and a bid price.
- Keep in mind that the time noted at the base of a forex chart is fixed as per the time of the provider of forex chart. XFR Financial Ltd is one such provide It is therefore imperative for you to interpret that announcement as per your local time. You’ll find it helpful to incorporate a world clock in your computer enabling you to easily change the time indicated in the chart to your local time.