What Are Forex Charts?

 

In the forex market, you will see the technical analysts and chartists using forex charts to observe and evaluate a wide array of securities so as to forecast forex movements while trading. But what are forex charts? If you are a beginner or with little experience of forex,

it is a must for you to understand the meaning of forex charts, if you want to see yourself successful in this arena. Read on to get the right explanation of forex charts in this article.

 

A forex chart is a series of prices which are plotted over a certain time period. The main idea behind them is to allow the traders to see and examine the historical forex rates. When you open a trading account with a forex broker, you will be provided with forex charts along with the forex charting software, which is usually free.

 

Let us now understand the meaning of forex charts in a little more detail. The y-axis or the vertical axis which you see on the charts, is the price scale while the x-axis or the horizontal axis stands for the time scale. You will see the prices plotted from left to right across the x-axis.

 

Forex charts are used by technicians, technical analysts and chartists. Analyzing a wide collection of securities to forecast future price movements, these charts provide an easy-to-read graphical representation. The securities which can be analyzed using forex charts are any tradable financial instruments like stocks, bonds, commodities, futures or market indices.

 

The use of these forex charts is not limited to just the technical analysts. They are also of a great benefit to fundamental analysts, as a graphical historical documentation makes it simple to spot the effect of primary events on a security's price. They help the analysts to know if the trading is near its highs, near its lows, or in between

Moving on with the explanation on what are forex charts, the daily and weekly data is compressed and represented graphically on the forex trading chart. The more condense the data is, the longer is the time frame involved to display the data. The option of data compression and time frame depends on the data available and your trading style.

 

For example, for forecasting short-term price movements, traders are likely to focus on forex charts consisting of daily and intraday data. Here they can get more details as the data is less compressed in the shorter time frame. But the shorter term forex charts tend to be more volatile and can contain lots of noise. Moreover, large and unexpected price movements can affect volatility and distort the whole picture with their wide high-low ranges and price gaps. For forecasting price movements in the longer run, traders usually concentrate on weekly and monthly charts, as these long-term forex charts contain less noise. These are especially good for getting the large picture and a broad perspective of the price action in forex.

 To conclude, forex chart analysis is what separates the successful traders from not-so- successful ones. We are sure that the forex charts explained in the above article will leave you with a very clear meaning of forex charts.

 
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