Tutorials on Chart Patterns.
What do the chart patterns stand for? How much are they helpful for you? What are the basics you should know? How to use them? How to implement the best method to calculate the price targets?
Continuation Chart Patterns.
Trend continuation patterns are formed during the pause in the current market trends and mainly mark the movement continuation. These patterns indicate that the price action displayed is a pause in the prevailing trend.
They help traders to differentiate pause in the price movement from its complete reversal and show that upon breaking out of the pattern the price trend will continue in the same direction.
Reversal Chart Patterns.
Trend reversal patterns are essential indicators of the trend ending and the start of a new movement. They are formed after the price level has reached its maximum value in the current trend. The main feature of trend reversal patterns is that they provide information both on the possible change in the trend and the probable value of price movement.
© IFCMARKETS. CORP. 2006-2017 IFC Markets is a leading broker in the international financial markets which provides online Forex trading services, as well as future, index, stock and commodity CFDs. The company has steadily been working since 2006 serving its customers in 18 languages of 60 countries over the world, in full accordance with international standards of brokerage services.
Risk Warning Notice: Forex and CFD trading in OTC market involves significant risk and losses can exceed your investment.
IFC Markets does not provide services for United States and Japan residents.
Books on Technical Indicators.
What do the technical indicators stand for? How much are they helpful for you? What are the basics you should know? How to use them? How to implement the best method of their calculation?
Trading Indicators by Bill Williams.
According to Bill Williams in order to reach success in the trading field, a trader should know the exact and whole structure of the market. This can be achieved by analyzing the market in five dimensions and taking into account certain Forex indicators.
Forex Oscillators.
What is Oscillator and why do we need it? This is a technical analysis ratio which is used to forecast the behavior of Forex market. The oscillator’s value fluctuates in the limited range while lower and higher bounds of this range correspond to “overbought” and “oversold” states of the market. Chart analysis instruments can be applied to the oscillators.
Forex Trend Indicators.
Forex trend indicators form the indissoluble and essential part of doing technical analysis in Forex market. They help to interpret the price movement, indicating whether the price movement is appearing.
Forex Volume Indicators.
Volume represents one of the primary Forex indicators of the market transactions and shows the total number of shares/contracts traded within a specified timeframe. The higher volume signifies higher liquidity of the trading instruments.
© IFCMARKETS. CORP. 2006-2017 IFC Markets is a leading broker in the international financial markets which provides online Forex trading services, as well as future, index, stock and commodity CFDs. The company has steadily been working since 2006 serving its customers in 18 languages of 60 countries over the world, in full accordance with international standards of brokerage services.
Risk Warning Notice: Forex and CFD trading in OTC market involves significant risk and losses can exceed your investment.
IFC Markets does not provide services for United States and Japan residents.
How to Read Forex Charts. The Ultimate Guide for Beginners.
Fundamental, technical, quantitative. В There are a number of methods used by forex traders to predict the movements of currency pairs. Some traders focus on news, interest rates and economic variables while others prefer to useВ charting toolsВ and indicators to guide their trading decisions.
Table of Contents.
However, no matter your trading method, you'll need to know how to read a forex chart - there's no escaping it. Luckily, we created this detailed guide to help you get started.
You must crawl before you can walk.  And forex charting is no different – you first need to have a good understanding of the basics, before you can progress to advanced stuff.
Lets get started.
Market Insights and Trade Ideas from a Professional Trader.
What is Forex?
Forex is short for вЂ˜foreign exchange’ – the game of buying and selling various currencies in the foreign exchange market.
In the global foreign exchange market, retailers, investors, speculators and institutions determine the relative value for the conversion of one currency to another via the buying a selling of currency pairs.
It’s a dynamic, liquid marketplace with daily turnover predicted to be in excess of 5.3 trillion dollars.
How to Read a Currency Quote?
Forex is the business of conversion, and since you are always comparing the value of one currency to another, forex is always В quoted in pairs. В В.
For example, the quote ofВ EUR/USDВ shows how many US dollars you will get for one Euro.
The first currency is called the base ; the second is called the quote . When you buy a currency pair, you buy the base currency, and sell the quote currency. Simple.
What is a Pip?
The most popular piece of terminology used by forex tradersВ has got to be the humble вЂ˜ pip ’.В В.
A pip is simply a unit you count profit or loss in. В В.
Typically, forex pairs are quoted to four decimal places (0.0001).В The вЂ˜1’, four spaces after the 0, is what is referred to as a pip. В В.
If a trader buysВ GBP/USDВ for 1.6000 and then later on sells it for 1.6020, that's a difference of 0.0020 or 20 pips. В В.
The exception to this is Yen pairs ( i. e.В USD/JPY), which are only quoted to two decimal places. В In this case the second spot after the 0 is referred to as a pip.
Now that you're up to speed, lets move on to what you really came for, how to read a forex chart.
What is a Forex Chart?
AВ forex chartВ is simply a graphical depiction of the exchange rate between to currencies. В.
It shows how the exchange rate of currency pair has changed over time. В.
For example, the chart above (Euro vs. U. S. Dollar) shows how the exchange rate between Euros and US dollars has fluctuated over time. В.
Forex charts can be plotted for variety of currency pairs, from major pairs like EUR/USD andВ GBP/USDВ to minor pairs such as AUD/CAD and NZD/JPY. В.
The choice is yours.
How do Forex Chart Timeframes work?
The amount of time shown on the chart depends on the particular timeframe you select. В.
By default, our forex charts are set to daily (1D) timeframes. В.
What this means is that each point on the graph, whether it be a line, candle or bar represents the trading data for one day. В.
If you were to change the timeframe to a 60 minute chart , each point on the chart would now represent 60 minutes worth of trading data. Example below:
With most free forex charting tools you can choose to display timeframes from as low as 1 minute all the way up to one month. If get more advanced charting software, you can view lower timeframes.
Types of Forex Charts.
Forex traders have developed several types of forex charts to help depict trading data. В.
The three main chart types are line, bar, and candlesticks.
For forex traders, candlestick charts seem to be the crowd favourite, and it’s easy to see why. В.
Compared to a line chart, which shows the price close to close, candlestick charts show four times the amount of information, displaying the close, open, low and high price of a given period. В.
By having this extra information, you can study вЂ˜ how ’ price has moved over a period of time compared to just seeing where the price closed.
The red and green portions of a candle are termed the вЂ˜body’.В.
The body of a candlestick represents the difference between the opening and closing price of the currency for a given time period. В.
If the opening price of the candle is lower than the closing price, the candle bodyВ color is green. If the opposite occurs, and the opening price is higher than the closing price then the candle body color isВ red. В.
The black lines above and below the candles are called вЂ˜wicks’ or вЂ˜shadows’.В.
Wicks represent the highest and lowest prices reached during the given time period.
An Overview of Forex Indicators.
Currency chartsВ help traders evaluate market behaviour, and help them determine where the currency will be in the future. В.
To help make sense of the currency movements depicted on a chart, traders have developed a number of different visual guides to assist them – indicators.
There are hundreds of different types of tradingВ indicators developed to cover every aspect of forex trading, from trend following to mean reversion. В.
Below we cover some of the most popular indicators used by currency traders.
Bollinger Bands.
Bollinger Bands are volatility bands placed x standard deviations around a moving average. Developed by John Bollinger, the bands widen in periods of increasing volatility and narrow when volatility decreases.
From a traditional perspective, the bands are used to highlight potential oversold and overbought areas. В.
For example, if a price move breaches the upper band, it might be expected that the price would then revert back to its mean, or in this case the middle moving average.
Middle Moving Average = 20 period simple moving average (20 SMA).
Upper Band = 20 SMA plus the 20 period standard deviation multiplied by 2.
Lower Band = 20 SMA minus the 20 period standard deviation multiplied by 2.
Relative Strength Index (RSI)
Developed by J. Welles Wilder the Relative Strength Index (RSI) is a momentum oscillator which measures the direction and velocity of price movements. В.
The indicator compares upward price movements in the closing price to downward movements in the closing price over certain time periods. The default period, suggested by Wilder, is 14 periods.
RSI = 100 – 100 / (1 + RS)В.
Where RS equals Average Gain divided by Average Loss.
Average Gain = [(Sum of gains over previous 14 periods / 14) * 13 + current gain] / 14.
Average Loss = [(Sum of losses over previous 14 periods / 14) * 13 + current loss] / 14.
Simple Moving Average Line.
SMA or simple moving average is the most common indicator plotted on forex charts. В.
Moving averages are used as they help smooth price fluctuations over a certain period, giving the trader a clearer picture of the direction of the price movement.
SMA = Sum of the closing prices / number of periods.
Intro to Reading Forex Trading Charts.
Every Forex chart tells a story.
To be profitable in today's world technology and advancement, one must be proficient in reading and more importantly understanding chart patterns and basic technical indicators. Below is just a few basic points to help your understanding of technical analysis and currency chart reading.
Price reflect the perceptions and action taken by the market participants. It is the urgency between buyers and sellers in the trading pit that creates price movement. Thus, all fundamental factors are quickly discounted in price. Therefore, by studying the price charts, you are indirectly seeing the fundamental and market psychology all at once - after all the market is feed by two emotions - Greed and Fear and once you understand that, then you begin to understand the psychology of the market and how it relates to the chart patterns.
Data Window.
Most computer programs will display a small box of data usually called a display window which will contain the following items:
O = Opening Price.
H = Highest Price.
L = Lowest Price.
C = Close or Last Price.
Tr = Volume or number of trades ( not contracts ) in that time period.
Price Bars.
Price bars are a linear representation of a period of time. This enables the viewer to see a graphic representation summarizing the activity of a specific time frame. As an example, we use one minute and five-minute bars for our system. Each bar has similar characteristics and tells the viewer several important pieces of information. First, the highest point of the bar represents the highest price that was achieved during that timer period. The lowest point of the bar represents the lowest price during the period. Regular bars display a small dot on the left side of the bar which represents the opening price of the period and the small dot on the right side represent s the closing price of the period.
Market Types.
The market often displays some very familiar patterns of price movement. Once a pattern is established, it becomes the most probable course of future price action until the market changes. There are two types of markets which become important for the beginning trader to identify; trending and trend-less. Each market type has two specific patterns which you will also notice over time. These market types and patterns can be defined as follows:
Trending - Steady elongated price movements with less than a 45-degree angle with occasional pauses, profit taking, or resting periods. Uptrends - A pattern of higher highs and higher lows. Downtrends - A pattern of lower lows and lower highs. Trend-less - Erratic price movements which are often steep ( greater than 45 - degree angle ) and cannot sustain and therefore must reverse. Although the movements can move many points in a short period of time, they often result in very little net price movement over time. Choppy - An erratic pattern of higher highs and lower lows. Sideways - A narrow pattern of lower highs and higher lows.
While up-trend and down-trend days can offer excellent trading results, choppy markets often create stop outs, while sideways markets produce for little in either direction. Our trading objective is to get into a trending market and ride until we make our target objective.
Four easy rules to follow regarding Volume:
When prices are rising and volume is increasing, prices will continue to rise. The uptrend is being confirmed. When prices are rising but volume is decreasing, the uptrend is losing momentum and may be near the end. When prices are falling and volume is increasing, prices will continue to fall. When prices are falling and volume is decreasing, the downtrend is losing momentum and may be near the end.
Reading charts can help traders understand the history of currency pair prices. Knowing the major elements of any chart, such as price or time-related data, including open, close, high and low, can give traders better clues on currency pair downtrends or uptrends. High volume is usually an indication that prices could be moving based on increased sentiment from long or short positions, so studying our basic volume and trend rules, along with basic technical analysis, can help you better understand why prices move. For daily charting ideas, you can view our FXDD blog. Advanced chart reading may be desirable for active traders executing a large volume daily. Activetraders can read charts quickly, capture data and identify trends. By reading charts, you might discover whether you prefer line, bar or candlestick charts as well as the technical analysis tools that fit your needs. As always, past trading results are not indicative of future trading results.
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About FXDD.
© 2017 FXDD, Newport Tower, 525 Washington Blvd #1405, Jersey City, NJ 07310.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
ADVISORY WARNING: FXDD provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect's individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FXDD specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.
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