Based on Forex Real-Time Charts guessing and predicting the future of exchange rates is called technical analysis, and various indicators are essential clues in that case. When trading currency pairs that are not well aware 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/INR, which is most familiar to Indian investors, also, the analysis of currency charts will be practical. Let’s start with an explanation of the candlestick, which is the most famous indicator.
Basics of exchange chart
When trading Forex, it is necessary to know how the market has moved and learn how to read Forex Real-Time Charts and technical indicators to predict future price movements.
The vertical axis of the Forex Real-Time Charts represents the price, and the horizontal axis represents time. For example, in the case of a US dollar/INR chart, the higher the graph, the stronger the dollar (weak INR), and the lower the graph, the weaker the dollar (strong INR).
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. Looking at the candles, you can get an accurate idea of how the exchange rate fluctuated over time.
One candlestick consists of a box-shaped body part and a beard part (upper beard and lower beard) extending up and down from it. The top and bottom of the fundamental part are the opening price (the exchange rate where the transaction was completed first) and the closing price (where the transaction was completed last). The top and bottom of the beard part are the high price (the highest exchange rate) and the low price (the lowest exchange rate). Rate) is shown.
If the closing price is higher than the opening price, the actual part is red and is called a “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 point.
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 point. (Because the colour of candlesticks varies depending on the vendor, please check the Forex Real-Time Charts screen of each vendor.)
There are several variations of candlesticks, such as daily, weekly, monthly, and yearly. 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 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 help explore long-term directions. Minutes are often used for day trading, which completes trading in one day and swing trading for days to weeks. It represents the high, low and close prices.
Main technical analysis
In addition to candlesticks, technical indicators can help you predict the future of exchange rates. Let’s explain the main ones.
It’s a good idea to try out some of the indicators and choose the one that suits your method to determine the direction of the trend and whether it is overbought or oversold.
The Moving Average is widely used not only for Forex but also for stock investment, and it can be said that it is one of the most popular technical indicators and candlesticks. The moving average is a graph showing how the “average closing price” has changed over a certain period, and the exchange rate is based on the trend of the line’s transition (upward, downward, flat). You can judge the direction (movement) of.
Most exchange Forex Real-Time Charts show two moving averages with different average calculation periods. Daily, the pattern of the combination of the 5-day line that connects the changes in the average value every five days and the 25-day line that connects the changes in the average value every 25 days is typical. The 13-week line every 13 weeks and the 26-week line every 26 weeks are mainly drawn in the weekly bar.
The moving average line (short-term line), which has a short calculation period, makes it easy to grasp the rapid development, but it isn’t easy to read the significant 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 current situation, it is possible to search for the tide of the exchange rate 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.
See how to use the moving average.
Bollinger Bands is an index based on the statistical idea that “most of the price falls within a certain range (band)”. The fluctuation range of the exchange rate in the future is predicted and displayed on the Forex Real-Time Charts based on the deviation value used for university entrance exams.
In many cases, the exchange rate moves so that it clings to the moving average line, and there are only a limited number of cases where the movement is far apart. In the Bollinger Bands, the moving middle line, where price movements are most likely to converge, is set as the axis, the upper limit price range that is the next easiest to approach is + 1σ (Sigma), and the price range with the next highest probability is + 2σ. In addition, the lower limit price range is set to -1σ and -2σ in the same way.
1σ corresponds to the deviation value 60, -1σ corresponds to the deviation value 40, + 2σ corresponds to the deviation value 70, and -2σ corresponds to the deviation value 30. Given these deviation levels, you can see that the exchange rate is most likely to converge to ± 1σ, and reaching ± 2σ is a rare case.
In the Bollinger Bands, the width of the band from + 2σ to -2σ repeatedly expands and contracts. When the turning point of the trend comes, it contracts, and when the up (or down) trend becomes apparent, it tends to expand, and it is possible to make a buying or selling decision based on these characteristics.
MACD is also called the “moving average convergence and diffusion method” and is a significant arrangement of the moving average line mentioned above. A simple average is used for the standard moving average. Still, based on the idea that the exchange rate set before you has a more substantial influence on future price movements, MACD calls it “exponential smoothing moving average”. The calculation method called is adopted.
The numerical value of “Short-term exponential smoothing moving average-Long-term exponential smoothing moving average” is calculated. The transition is shown in a graph and called MACD, like the index name. On the other hand, the moving average line of MACD is also graphed, called “signal”, and the market situation is analyzed from the transition based on these two movements.
If the downtrend continues in the exchange rate, the MACD will move below the “signal”. After that, when the MACD breaks out of the “signal”, it can be judged that the “buy sign” called “golden cross” is lit, as in the case of the moving average.
On the contrary, the MACD is above the “signal” while the uptrend continues, but eventually, it will break below. This is a phenomenon called “dead cross” and is positioned as a “sell sign”.
The RSI is also called the “Relative Strength Index” and quantifies the strength of price fluctuations based on the amount of increase and decrease over a certain period. By looking at this indicator, you can understand the overheating situation of the exchange rate (overbought or oversold).
Differences depend on the currency pair, but in general, if the RSI falls below the 25-20 level, it will be oversold, and if it exceeds the 70-80 level, it will be overbought. However, this view is practical only when the curve shows a rise or fall on a relatively gentle curve or when the exchange rate conflicts with the upper and lower limits, which is almost constant.