The term Forex charts, as used in the context of the Forex market, refers to price charts that display data from various foreign exchange markets. Currencies are traded in separate pairs, such as the US Dollar/Japanese Yen, Australian Dollar/ Malaysian Ringback Ringed, Canadian Dollar/ Swiss Franc and Euro/Swiss Francs. The term Forex charts are therefore used in the context of foreign exchange trading and is sometimes used interchangeably with the term Forex quote.
As part of their role as price information distributors, forex charts are essential tools for forex traders to make accurate projections and predictions of future trends in the exchange market. Price data is considered the most reliable of forecast for fundamental factors such as economic growth and potential interest rates. However, other important data such as political developments, environmental considerations, or sudden unexpected changes in financial markets may also be considered in determining the Forex closing price. As such forex charts allow for traders to identify possible turning points and areas of growth or decline in the market. Moreover, they are useful for identifying support and resistance levels, which are necessary for entering or exiting a trade.
In forex charts, the movement of the top of the chart is called the pip. A pip is the width of 1% of the current difference in the market price between the opening and closing price. For instance, if the currency pair EUR/USD was valued at its opening and closing price of $1.00 each, the pip would be exactly equal to 100. Therefore, the size of the pie is an indicator of the market's momentum. In technical analysis, it is necessary to look for similarities in the pattern of movement of the top of the Forex charts against the market's average moving point. If the comparison is successful, then the chances are that the trend will continue to go up.
The size of the pipe is calculated from the moving average line. It is commonly used by forex traders to identify the direction of the foreign exchange. Trading in force may often become difficult due to market fluctuations. Therefore, forex traders are often advised to remain within the larger range of prices of their currency pairs.
A different kind of Forex chart, the 20-period simple moving average, is also widely used in foreign exchange trading. This type of Forex chart uses moving averages, which are calculated with a starting value of zero and ending value of one. The longer the time period used in the calculation, the higher the slope of the curve. The slope of the curve is also known as the degree of movement between the average line and the closing price.
To calculate the value of the 20 so in the case of the 20-period simple moving average, the closing price is the basis. A higher closing price indicates stronger movements between the average line and the closing price. On the other hand, a lower closing price indicates weaker movements between the average line and the closing price. The calculation of the value of the moving average can be done by taking the difference between the actual closing price and the moving average line. In order to find the value of the line, the calculator can also be used.
Curves are used in Forex charts in order to show the general direction of the currency prices over a longer period of time. Curves are typically vertical, but depending on the nature of the market, they can be horizontal, curved or even oblique. The most common types of Curves are the Washi Curve, which are formed when the price of a currency goes up for a period of time; the exponential curve, which show sharp increases and decreases in the prices of currencies over a period of time; and the parabolic SAR curve, which show a general upward trend of prices of currencies over a long period of time.
The key to success for traders using Forex charts is to understand how they work. A trader can not only apply Forex trading strategies to Forex charts, but he should also study the basics of Forex trading. Learning how to interpret a currency chart is an essential part of learning Forex trading. When a trader already has a good grasp of the basics of Forex charts, then he will be able to apply his new knowledge to any type of Forex chart and successfully make money from trading.