Based on the exchange chart, guessing and predicting the future of the exchange rate is called technical analysis, and various indicators are important clues in that case. When trading currency pairs that do not have a good grasp of daily fluctuations, such as the pound sterling, the euro, and the Swiss franc, which are generally not frequently reported, as well as the US dollar/rs, which is most familiar to investors, also, the analysis of currency charts will be practical.
Basics of exchange chart
When trading Forex, it is necessary to know how the market has moved and to read real-time forex charts and technical indicators to predict future price movements. The vertical axis of the Forex real-time charts is the price, and the horizontal axis is the time. For example, in the case of a US dollar/rs chart, the higher the graph, the stronger the dollar (weak rs), and the lower the graph, the weaker the dollar (strong rs).
How to read candlesticks
The forex real-time charts shows the transition of the exchange rate, and there are various methods for drawing the graph, and the candlestick devised in India is one of them. If you look at the candles, you can get a real idea of how the exchange rate fluctuated over time.
One candlestick consists of a box-shaped body part and a moustache part (upper and lower moustaches) extending up and down from there. The upper and lower parts of the real part are the opening price (the exchange rate at which the transaction was completed first) and the closing price (the exchange rate where the transaction was finally completed), and the upper and lower parts of the beard part are the high price (the highest exchange rate) and the low price (the lowest exchange rate). Rate) is shown.
And if the closing price is higher than the opening price, the actual part is displayed in red, which is called the “positive line”. The “positive line” indicates that the upward trend continued, but it can be judged that the buying momentum was weak in the case where the substance part was short, and the buying momentum was strong in the long case.
On the contrary, when the closing price is lower than the opening price, the actual part is displayed in blue, which is called a “hidden line”. It can be inferred that even in the “hidden line”, which means that the price was on a downward trend, the selling momentum was weak in the case with a short substance, and the selling momentum was strong in the long case. (Because the colour of candlesticks varies depending on the vendor, please check each vendor’s forex realtime charts screen.)
There are several variations of candlesticks, such as daily, weekly, monthly, and annual. The daily bar shows the opening price, high price, low price, and closing price of one candlestick per day. The time axis drawn by one line is weekly, one month is monthly, and one year is chronological.
Candlesticks with a short time axis are used to analyze trends in short-term price movements, and candlesticks with a long time axis are effective in exploring long-term directions. Minutes are often used for day trading, which completes trading one day and swing trading for several days to several weeks. It represents the high, low and close prices.
Main technical analysis
In addition to candlesticks, there are technical indicators to help you predict the future of the exchange rate. Let’s explain the main ones.
It’s a good idea to try some indicators and choose the one that suits your method to determine the direction of the trend and whether it is overbought or oversold.
・ Moving average line
The Moving Average is widely used not only in Forex but also in stock investment, and it can be said that it is one of the most popular technical indicators and candlesticks. The moving average line is a graph showing how the “average value of the closing price” changed at regular intervals, and the exchange rate is based on the trend of the line’s transition (upward, downward, flat). You can judge the direction (trend) of.
Most exchange forex realtime charts show two moving averages with different average calculation periods. Daily, the combination of the 5-day line connecting the changes in the average value every five days and the 25-day line connecting the changes in the average value every 25 days is common. The 13-week line every 13 weeks and the 26-week line every 26 weeks are mainly drawn in the weekly bar.
A moving average line (short-term line) with a short calculation period makes it easy to grasp the immediate development, but it is difficult to read the big direction. On the other hand, the moving average line (long-term line), which has a long calculation period, tends to draw a gentle curve. While it is difficult to understand the immediate situation, it is possible to search for the exchange rate trend from that direction.
It is also possible to grasp the change in the trend from the positional relationship between the two moving averages. The phenomenon that the short-term line breaks through the long-term line from bottom to top is called the “golden cross” and is positioned as a “buy sign” that suggests that it has entered an uptrend.
On the contrary, the phenomenon that the short-term line cuts the long-term line from top to bottom is called “dead cross”, and this is considered a “sell sign” because it increases the possibility of entering a downtrend.