Forex Live Chart – How to Use A Chart
Forex live chart is a necessity if you are planning to do your own market analysis. ‘Live’ here means the service that provide it will use current actual market data to create the chart. Actually, it is a very handy tool to have even if you don’t do your own market analysis.
The first step is to choose the currency pair to analyze from the drop down menu or other interface. After you find the one you want, select the chart type, it usually comes in 4 forms: Line, Bar, Candlestick, and Table. If you are a beginner, I suggest start with a Bar type. Once you select the type, choose a time frame such as one minute, five minutes, daily, weekly, etc.
In a bar chart, each vertical bar that you see represents a time frame. The top of the bar is the highest price and the bottom of the bar is the lowest price during that particular time frame. For each vertical bar, there are two horizontal bars, one to the left and the other to the right. The bar at the left is the opening price while the bar at the right is the closing price for that specific period of time. Tips: Use the zoom function to see it clearly. Usually, charting is a standard feature in a trading platform, read more about it at forex trading platforms.
There are some things that you need to know when using forex live chart:
Understanding Support and Resistance
The market volatility can bring it anywhere and no one can predict it 100%. But based on historical data, there are some condition where the price doesn’t exceed or below a certain price for a period of time.
Example:
-From July to December, the EUR/USD prices never exceed 1.645, that means 1.645 is the resistance for EUR/USD during that period.
- From January to May, the USD/JPY prices never fall below 90.070, that mean 90.70 is the support for USD/JPY during that period.
Entry and exit point can be decided based on these support and resistance data. A conservative method is buying at support and sells at resistance. More advanced strategies like sell at higher price or buying at resistance breakout are also applicable; you just need the right time, currency pair, and trading system.
Note: A time when the price has moved passed support or resistance line is called breakout.
Today, there are various easier ways to decide entry point, read about it at forex trading signals.
Indicators
A good chart software also allows you to add various indicators. Indicator is a mathematical calculation based on prices that can be used to help you make decision. For example: MVA indicator can show you the average price for a certain period, EMA show you the weighted price calculation for a certain period, etc.
Back Testing
Most experienced traders are utilizing forex live chart to perform backtesting in order to test their trading systems. They run their system based on data in the chart for previous one or two years to see if it is profitable system or not. The common problem with this is when they found that it doesn’t works, they tweaking the system so it can match the data and always create profitable transaction.
That is a very fatal choice; most of the time the systems will not holds long against the actual current market movement. Back testing is good and you definitely can use the chart for that, but you also need to test the system in the current market for at least two or three months before decide that it is works or not. Using a dummy account is a good idea for this test.
There are various ways to use a forex live chart in order to boost your trading and learning the basic of using it is a great beginning for your career as a trader. If you interesting to know more about forex trading, visit learn currency trading.
Tags: basic, Forex Live Chart