Forex Trading, Forex News, Articles and Trading Strategies

Technical analysis is nothing but analyzing the market with the help of charts. More calculation than speculation. As already mentioned, analyzing the market before placing any trade is a must for trading currency wisely. While fundamental analysis is more to do with the economic news, technical analysis is more of trends.

If you are smart enough to find a trend analyzing the charts, you would be placing profitable trades. It takes a lot of practice in identifying a "trend". To do that we must know the basics of charts. There are totally 3 types of charts.

1. Line chart
2. Bar Chart
3. Candlestick chart

Out of these three, the candlestick charts convey more information and is very easy to read and interpret. It helps the beginners to understand the market better.

Line Chart:
A line chart simple draws a line from one closing price to another closing price. It is like joining dots and making a graph. You can see the price movement of a currency pair through this chart. Here is an example of EUR/USD Line chart.



Bar Chart:
A bar chart gives more details like when the trade was opened, when it was closed, the high and low of the currency pair for that particular period. These charts are better to analyze, as we get almost all the required details. Here is an example of EUR/USD bar chart.



The basic bar chart interpretation :



Here,

Open: The horizontal line on the left is the opening price
High: The top of the vertical line defines the highest price of the time period
Low: The bottom of the vertical line defines the lowest price of the time period
Close: The horizontal line on the right is the closing price

Candlestick charts:
The most favorite charts of forex experts/traders. It gives the same information as that of a bar chart but in a more readable form. This makes a trader's life easy. Just by looking at the graph we will be able figure out the market's condition and hopefully a trend which will be our major goal in chart analysis. Here is an example of EUR/USD candlestick chart.



The basic Candlestick chart interpretation:



Here,

Open,close,high,low means the same as bar chart. However, the green color indicates that the market went bullish for that period and red color indicates that the market went bearish for that period. As of now just remember this. I will be writing more in detail about bullish and bearish markets.