You Have To Learn How to Read a Forex Trading Chart To Be A Skill Trader
How to Read a Forex Trading Chart
In order to actively trade in the Foreign Exchange (forex) currency market, you must be able to read a forex trading chart. The first currency listed in a pair is called the base currency. For example in EUR/USD the first term, Euros, is the base currency. The second term, in this case dollars, is called the term currency. When you are buying a pair, you are buying the base currency.
When you are buying a pair, it is called being long in the position. You want the base currency to increase in value versus the term currency. This way you will make a profit buying. If you are selling a pair, you are short in the position. You want the base currency to weaken in value versus the term currency.
This is how you make a profit selling. Many forex charts display the bid or selling price instead of the ask or buying price. Check closely to make sure you don’t mix these two up. The higher of the two prices is usually the ask price, while the lower is the bid.
The time frame displayed informs you of how the currency pair is currently doing. Be careful to watch the time frame closely as different systems use different time lapses. Anywhere from a four hour chart to a fifteen minute chart is available and can greatly affect whether you are looking at a temporary spike or dip or a longer term development.
Different time zones can also affect what chart you are looking at, so make sure you set the chart to your current time zone. A world clock is handy to convert time announcements so you know when a major buying or selling date is approaching.
Another important tip is to check whether the times on your chart corresponds to the individual point, called a candle, on the graph. This is vital because forex trading is a real-time, to the minute type trading. If you are making a trade based on a market announcement, it is vital to be in the right time or else you will likely lose money.
Practicing reading forex charts is essential for ensuring you understand how they work. If you can master reading a forex chart, you are well on your way to competing in this very fast-paced market.
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Tagged with: currency charts • Currency Market • Currency Value • Different Systems • Exchange Currency • Foreign Currency • Foreign Exchange • Forex Charts • Forex Trading • Graph • reading forex chart • Second Term • Time Announcements • Time Frame • Trading Currency
Filed under: How To Trade Forex
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