Forex Trading Chart that can grasp the price movements of exchanges and stock prices are indispensable for making profits with Forex. This time, I will explain how to read the Forex chart.
What is a chart?
FX (Forex Margin Trading) is one of the most popular financial products as a transaction that can make a big profit even with a small investment fund. For example, many “billionaires” have earned more than 100 million yen from investment funds of about 300,000 yen. Forex has a leverage function that allows you to trade several times as much as your investment funds, so you can aim for big profits even if you have a small number of investment funds. (On the other hand, you may incur a big loss.) To make a profit with such Forex, you need to study how to read the chart.
A Forex Trading Chart is a graph that shows price movements. In addition to FX, there are charts for stock prices and other items whose prices fluctuate. Many people have seen the chart even if they are not Forex traders.
By looking at the Forex Trading Chart, you can grasp the price movements of exchanges and stock prices and analyze future price movements. There are two types of FX analysis methods: fundamental analysis and technical analysis, and the analysis method using charts is technical analysis.
Fundamentals analysis is a method of analyzing economic indicators such as employment statistics and announcements of policy interest rates, the country’s economic and political situation, and analyzing future exchange and stock price movements. Fundamentals analysis is good for predicting long-term price movements, not short-term analysis. On the other hand, technical analysis analyses future price movements by looking at charts. There are various indicators called technical indicators for analyzing charts, and you can improve the accuracy of analysis by using these technical indicators. Technical analysis is an analysis method many traders use because it is easy to understand visually and can predict short-term price movements.
Forex Trading Chart allows you to observe real-time changing movements of the Forex chart at delimited times such as 1 minute, 5 minutes, and 10 minutes. The line representing the price movement over a certain period is called the “hourly bar”. Depending on the Forex company, it is possible to display multiple timeframes on one screen, and you can grasp the difference in price movement depending on the time zone at a glance.
Forex Trading Chart type
There are various Forex Trading Chart, but they are mainly summarized in the following three types.
・ Bar chart
・ Line chart
Let’s take a closer look at each chart type.
Candlesticks are four prices (starting price), high price (taken), low price (yasune), and closing price (end) for a certain period, such as one day or one week. It is expressed in real). Candlesticks are composed of “entity” and “beard”. An entity is a box made up of open and close prices, and a beard is a line that indicates the high and low prices from the entity. There are two types of candlesticks, positive and negative. If the closing price is higher than the opening price, it will be a positive line, and if the closing price is lower than the opening price, it will be a hidden line.
By using candlesticks, it is possible to grasp the strength and direction of the market visually. In addition, it is a very convenient chart because you can see the opening price, closing price, low price, and high price of the period with one candle. It is the most popular chart in Japan, and many traders use it. The candlestick was invented in Japan, and it is a chart that originated in Japan and is also used overseas as the name of the candlestick.
A bar chart is a bar representation of open, close, low, and high prices. It is a chart that is often used in Europe and the United States, and unlike candlesticks, it is a chart that is shown only by bars. Therefore, it is a very simple chart. Since the bar chart emphasizes high and low prices, it is easy to grasp the direction of exchange rate and stock price movements.
A line chart is a chart that connects only the closing prices. Since the opening price, high price, and low price are not displayed, it is said to be a chart that makes it easy to grasp the stock price direction. Line charts are also good for understanding long-term trends.
The line chart has an uptrend and a downtrend. An uptrend is a state in which stock prices and exchanges are rising while rounding up the latest highs and lows, and a downtrend is a state in which stock prices and exchanges are falling while devaluing the latest highs and lows.
How to read the chart
The chart’s vertical axis represents the price, and the horizontal axis represents time. It is important to confirm not only short-term movements but also long-term movements. For example, when using a US dollar-yen chart, the higher the chart, the weaker the yen, and the lower the chart, the stronger the yen. The yen’s depreciation means that the yen is sold and foreign currencies such as the US dollar are bought. And the appreciation of the yen means that the yen is bought, and foreign currencies such as the US dollar are sold.
In the case of foreign currency deposits, you cannot make a profit unless the yen depreciates. However, in Forex, you can trade from “sell”, so you can make a profit even if the yen strengthens. It can be said that the big attraction of Forex is that you can make a profit even if the yen strengthens or weakens.
Tips for viewing charts
When looking at the chart, try to understand the trend first. A trend indicates the direction of the market. At first glance, the exchange rate seems to move in a complicated manner, but there are only three movements in the market: “rise”, “fall”, and “flat”. If you can predict the direction of the market correctly, you will be more likely to make a profit with Forex.
It is very effective to draw a trend line to predict the trend. Is it an uptrend, a downtrend, or a flat situation? The line drawn on the chart to judge this is called the “trend line”, and if you can draw an accurate trend line, it will contribute to increasing the winning percentage of Forex.
A trend line is a line connecting the highs or lows of candlesticks. The correctly drawn trend line acts as a downside support line and an upside resistance line. The downside support line is the line connecting the downside and upside of the past price on the chart and is the line seen during the uptrend. On the other hand, the upside resistance line is the line connecting the high and high prices of the past price on the chart, which is the line seen during the downtrend.
It takes some getting used to drawing the trend line accurately, as it depends on which candlestick’s high and low prices are connected, whether the trend line works or not. If you draw a trend line by connecting a candlestick’s high and low prices that don’t make much sense, the trend line will hardly work. You will be confused by the wrong trend line, so drawing the trend line will be negative.
Therefore, if you are a Forex beginner, try drawing a trend line on the chart screen of the browser provided by the Forex company of the opened account or the chart screen of the application. The chart used at this time should be a chart that is easy to see and has good operability. First of all, it is important to get used to drawing trend lines, so you do not need advanced functions. Once you get used to drawing trend lines, use advanced features as well.