This article is all about the basics of forex charts and using technical analysis to win. It’s the simplest most time efficient way to achieve currency trading success and anyone can do it with the right forex education…

Forex charts allow you to see all the inputs that go to make up the price and while you get people who say you cant trade without taking into account the fundamentals, that to a degree is true – but forex technical analysis does take the fundamentals into account and the following equation will make this clearer:

Fundamentals (supply and demand) + Investor View Of = Price

The fundamentals are not important by themselves – it’s how all the traders view them that makes the price. We all have the same facts to look at but we all draw different conclusions from what we see and this vast mass of opinion makes the market price.

Technical analysis simply assumes that all fundamentals will quickly show up in price action and it also does something more – it tells you how the investors perceive them.

Markets move on investor sentiment and that’s why studying charts is so effective.

Human nature is constant and this is reflected in the charts.

The same formations reflect human psychology, again and again and if you can spot these high odds formations or patterns, you can execute you’re trading signals, with the odds on your side and enjoy currency trading success.

A big myth about forex charting is you need to predict what happens next.

You don’t.

If you do you are simply hoping or guessing and that won’t get you far in life, let alone forex trading. You should simply trade the truth, as you see it, on the chart and by doing so, you will have the odds on your side.

When trading with charts you only need a simple system, as it’s proven that simple systems work best, as they are more robust in the face of brutal ever changing market conditions.

You also need to trade valid data.

This is data where you can get the odds on your side and this means no day trading and no forex scalping!

The data is not reliable and prices can and do go anywhere in a day. In the longer term you can measure investor sentiment but not in the short term.

If you have a simple trading system, trade the reality of price and show discipline you can win.

Forex charts allow you to step back from the crowd and see value and sentiment, right there on the chart which you can trade for profit.

Charting is an art not a science but if you practice your art, you will soon have a powerful way of trading which will allow you to seek big forex profits in just 30 minutes a day.

Forex charts and technical analysis can make you money – its simple to learn time efficient and can deliver huge profits. Here we are going to look at a simple way to incorporate forex charts in your trading system and win big.

First things First

Forget the myths and there numerous ones but here 2 of the worst:

- You predict forex prices

- Forex markets move to a scientific theory

There related to each other of course so lets be clear:

Prediction is another word for hoping or guessing and that wont get you far in life and certainly not forex trading – you need to simply trade the reality of price change and that’s it. Human nature is constant – but were not logical beings and we don’t conform to scientific theories. There are many people who will tell you there is a scientific theory of market movement but if there were, we would all know the price in advance and there would be no market!

A Game of Odds

When you trade forex you are involved in a game of odds not certainties. Sure you are going to lose some trades but like the good poker player if you trade the odds you can win big.

The theory of market movement

Is very simple, here it is:

All fundamentals + Human perception of them = Price

All you do when using forex technical analysis and charts is to assume that all fundamentals will show up instantly in price action, so you are taking into account the supply and demand situation. Forex charts though give you a huge advantage:

They show you how humans view price and it is humans who decide the price of anything. You can then follow your charts and look out for high odds repetitive chart patterns to trade for profit.

You can do this in many ways but let’s make an important point – your forex trading system needs to be simple!

Simple systems work best and always have. Clutter your analysis with to many indicators or make it to complex and it will have too many elements to break.

When trying to make profits with forex charts this is all you need:

- An understanding of support and resistance

- A few indicators to indicate if a level will hold or break which are momentum based

You can put together a forex trading strategy based upon the above in less than a week and we will discuss these strategies in greater depth, in part 2 of this article theory.

Here we have given you a basic understanding of what to expect from your forex charting and how to get the basics sorted.

In the next article, we will look at building your own trading system based upon forex charting. We are going to look at putting together a system which will take you less than a week to master, 30 minutes a day to execute and could make a lot of money.

Forex charting plays a very vital role your tools to success in the foreign exchange market. To completely understand the constantly changing patterns of market rates, forex charting provides you with an overall snapshot, which will help you to do your trading in a effective manner. If you are unsure of the different benefits of forex charting, read on and get ready to be convinced.

Why is Forex Charting So Crucial?

Completing trades on the foreign exchange market place using forex charting is almost like playing on the highway, where things move very quickly and you have to catch the market action in the blink of an eye. If you are able to catch a financial trend it can bring new financial rewards whereas if you miss some of the key data points may leave you stranded.

Forex charting can be used in spite of your trading style or skill level. Forex charting allows you to get a bigger picture of where the market is heading, then enables you to anticipate various events that may bring some fairly large financial rewards.

Generally, the currency market on day by day basis, are unable to reveal the long range trends. But by using forex charting, you can see the changes in the recent market activity and allow you to make predictions for future currency movements. This will keep you one step ahead of the market trends, which may result in financial profits.

Characteristics of Forex Charting

The best feature of forex charting is that it is easy to use and it brings you the most recent real-time data. Nevertheless, the view is much bigger than the day to day movements of the market or even a certain stock. Forex charting mainly gives importance to observing the market, which really has the ultimate controlling influence over the performance of individual stocks.

This will assist you in seeing why even the best stocks sometime suffer from negative movements in a bear market. This type of charting software helps to map out the large amounts of historical data and provides the information in an arranged way to give you an overall view of what is happening now, what has happened in the past, and then hopefully what is in all probability going to happen in the near future.

The data that is charted also features analysis that is simplified to help you make the proper market timing determination. Forex charting provides a wealth of details and advice at your fingertips. The unbiased projects are predicated on numbers, hard facts and trends, which can then be translated at a later time for profit.

Forex trading charts. What are Forex Charts & How Do You Read Them?
A forex chart is a graphical representation of price movement over a specific period pf time and is composed of an x-axis (time) and y-axis (price). The choice of the time frame employed depends on the user’s need. It is obvious that an intra-day scenario will not be based on monthly chart.

Forex Tick Chart
Tick chart has the finest scale – 1 tick (individual quoting of bid and ask prices by market-maker). It is the chart of Bid and Ask quotations which look as columns on the chart of the prices.
The maximum of each separate column is Ask, the minimum of each concrete column is Bid.
As a rule tick chart is not used for the analysis of the market as its scale is so small that does not approach for the technical analysis. However tick charts are effectively used for exact definition of support and resistance levels and also to raise efficiency of purchases and sales, making it on local minima and maxima.

Forex Line Chart
A line chart shows a line connecting the “closing prices”. The closing is the last price recorded at the end of a specific period of time (session).
A line chart’s strength comes from its simple design; it provides an uncluttered, easy to understand view of a currency’s price. Line charts display the currency’s closing price.

Forex Bar Chart
Bar charts provide more detailed information compared to Line chart. Basically all characteristics mentioned for the line chart also hold true for the bar chart. However, the construction is a different one. The bar chart is composed of a high (highest price during a session), a low (lowest price during a session) and the close. 
All that is required is to draw a vertical line (bar) from the high to the low. Then, set a horizontal dot from the vertical line to the right, representing the close. Sometimes users refer also to the opening price; a dot drawn on the left side of the bar. The bar chart is the most popular chart is used in forex trading today.
On a daily bar chart each bar represents one day’s activity. The vertical bar is drawn from the day’s highest price to the day’s lowest price. Closing price and opening price are represented by ticks on the bar.
Bar chart is graphic representation of price action using a vertical bar to connect the highest price to the lowest price during a period. The opening price is displayed as a horizontal line on the left side of the bar. The closing price is displayed as a horizontal line on the right side of the bar. Bar Charts can be constructed for any time period in which prices are available. Traditionally, the most popular time interval for bar chart is hourly chart. However, since the wide availability of the real time prices, it is common to use smaller time interval such as 30 minutes, 15 minutes, 5 minutes, 1 minute.

I have been writing about forex trading for the past few years you can read more in my website

http://easyforexforum.com

Thank you

David

Being able to read trends and forecast fluctuations using Forex chart techniques in the foreign currency exchange is a skill that will take you from a beginner to someone who is much more successful in Forex trading. By being able to take advantage of upcoming rate changes, you will be able to make more trades that lead to a profit. There are two primary methods that are used to understand market fluctuations, technical analysis and fundamental analysis. Being able to read and understand Forex chart techniques is particularly essential to technical analysis. Most experienced brokers and traders will often use a mixture of both.

Technical analysis relies on basing predictions using charts and graphs based on prior Forex market movements. This is a popular system because it looks at real historical data and is often very reliable. The two main components that are charted in relationship to the Forex market are trends in price movements, and the past history of Forex. All of these factors effect rate changes, because the Forex is so sensitive to all of these influences.

Price changes refer to trends in pricing that usually repeat over time, and when graphed on a chart, can easily reveal reappearing patterns that can help you make decisions. Another popular area for creating chart techniques are historical trends, which is usually charting the relationship between time and prices. This can be charted in a number of different ways, and are usually labeled in five major categories: waves, number theory, indicators, gaps, and trends.

As you may imagine, this can get confusing for a inexperienced trader. Most charts are now available online, as part of a subscription service, and include frequent updates. Because technical analysis is a popular method, there are many services available. If you would like to become more proficient in Forex chart techniques, joining a service that provides charts via the Internet, and assistance in reading and analyzing the chart information, can be very helpful.

Fundamental analysis is often used in conjunction with chart techniques, but relies primarily on current events and politics, such as seasonal changes, supply and demand, and governmental actions. while not necessarily historical data, it can be invaluable for understanding Forex pricing and rate change. Because you are trading in the currency of different countries, political and economic factors that affect those countries will often be reflected in the Forex.

If you are planning to be successful with Forex trading, it is important to familiarize yourself with forecasting techniques such as technical and fundamental analysis. Because these techniques can be complicated, being able to access this information online and to practice chart reading and forecasting will go a long way to increasing your success with Forex. While it may be a little daunting at first, you will be joining the ranks of those successful in Forex trading.

Nothing affects your profitability more than the spreads offered by your Broker. But spreads in the Forex charts spot market can be confusing to understand, and the marketing from many brokerages can be deceiving. Nearly every broker is claiming to have the tightest Forex charts and spreads in the industry. However, what does this mean, and how can you tell if a brokerage is delivering what they promise.

In order to understand the spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. The pips are the smallest unit of difference between the two currencies in the quote. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips, the difference between the 2 and the 4. If the quote is 1.22225/4, then the spread is going to equal 1.5 pips.

The spread is how brokers make their money. Wider Forex charts and spreads will result in a higher asking price and a lower bid price. The end result of this is that you will pay more when you buy and get less when you sell, making it more difficult to realize a profit. Brokers generally don`t earn the full spread, especially when they hedge client positions. The spread helps to compensate the brokerage for the risk it assumes from the time it starts a client trade to when the broker`s net exposure is hedged (which could possibly be at a different price).

Forex charts and spreads affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider Forex charts and spreads means buying higher and having to sell lower. A half-pip lower spread doesn`t necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn`t.

The tighter the spread is the better things are going to be for you. Nevertheless, tight Forex charts and spreads are only meaningful when they are paired up with good execution. A good example of this is when your screen shows a tight spread, but your trade is filled a few pips in the wrong direction, or is mysteriously rejected.

When this occurs repeatedly, it means that your broker is showing tight Forex charts and spreads but is effectively delivering wider Forex charts and spreads. Rejected trades, delayed execution, slipping, and stop-hunting are strategies that some brokers use to get rid of the promise of tight Forex charts and spreads.

Forex charts and spreads should always be considered in conjunction with depth of book. Oddly enough, when it comes to economies of scale, Forex charts doesn`t even act like most other markets. On the inter-bank market, for example; the larger the ticket size, the larger the spread is. So when you see a 1-pip spread on an ECN platform, you have to wonder if that spread is valid for a $2M, $5M or $10M trade, which it probably isn`t. In many cases, the tight spread that is offered applies only to a capped trade sizes that don`t work for most of the common trading strategies.

Spread policies change a great deal from broker to broker, and the policies are often difficult to understand. This makes comparing brokers difficult. Some brokers actually offer fixed Forex charts and spreads that are guaranteed to remain the same regardless of market liquidity. But since fixed Forex charts and spreads are traditionally higher than average variable spreads, you can end up paying an insurance premium during most of the trading day so that you can get protection from short-term volatility.

Other brokers offer traders variable Forex charts and spreads depending on market liquidity. Forex charts and spreads are tighter when there is good market liquidity but they will widen as liquidity dries up. When it comes to choosing between fixed and variable rates, the choice depends on your individual trading pattern. If you trade primarily on news announcements that you hear, you may be better off with fixed Forex charts and spreads. But only if the quality of execution is good.

Some brokers have base the Forex charts and spreads they offer their clients on the type of account the client has. For example, those clients that have larger accounts or those who make larger trades may receive tighter Forex charts and spreads, while the clients that are referred by an introducing broker might receive wider spreads in order to cover the costs of the referral. Other brokers offer the same spreads to everyone.

It is often difficult to get information on a company`s Forex charts and spread policy or its order book depth. Because of this, many traders are caught up in the promises they hear, often take a broker`s words at face value. This can be dangerous. The only real way to find out what a company`s policy really is to try out various brokers or talk to those who have.

Here we are going to give an introduction to using forex technical analysis and using forex charts for bigger profits. Forex technical analysis if done correctly is the best and most time efficient way of seeking profits and should be considered as part of any forex trading strategy.

The first point to keep in mind is:

Forex technical analysis is a game of odds not of certainties, so forget about predicting with scientific accuracy, no one can achieve that – but if you understand the following equation, you can make big forex profits:

Fundamentals + Investor Psychology = Price

It is a fact that the fundamentals have an influence on price – all investors have the facts at their disposal but they see them in their own way and this mass of millions of people determines forex prices.

Investor psychology

Human psychology is constant and never changes.

Traders will always be influenced by emotion and these emotions of greed and fear, will push prices to far away from fair value and these price spikes are easy to see on forex charts.

The important point to keep in mind is that investor psychology repeats – and so do chart patterns.

Seeing the Whole Picture

Another very important point to keep in mind with forex technical analysis is that it studies the fundamentals.

All it does is simply assume that in today’s world of instant communications, they show up straight way in price action.

Studying forex charts however does something more:

It studies how investors perceive the fundamentals.

Its is not enough to simply look at the facts, as we all draw our own conclusions from what we see and emotions ensure that investors don’t act logically – they push prices to far ( either up or down) based upon their emotions.

Studying forex charts gives you the whole picture – it reflects the fundamentals and more importantly, how investors perceive them.

When using forex charts you don’t care how and why prices move, you simply look at the reality of price and try and make profits from the moves.

It sounds simple as a concept and it is – but it’s extremely powerful and if you incorporate it in your forex trading system, you can make big profits by trading when the odds are on your side.

Forex Technical Analysis Is Time Efficient

Using forex technical analysis is time efficient, you are studying price and don’t need to make assumptions of where they may go based upon the news – you can see the price as it is and simply trade the truth.

Many traders continually look at news and try and trade off it – but this is hard – the fundamentals are discounted instantly and you have very little chance of winning. Furthermore, if you look at the opinion of others your emotions get involved and any trader who lets emotions dictate their forex trading strategy, is destined to lose

Trading forex charts lets you see the reality as it is – no opinions or guessing and that gives you a huge advantage when trading for profits.

Forex Charting is An Art

Of course, all people use forex charts in different ways and it’s an art not a science.

It is similar to being a ships captain – use your charts correctly and you can get from A – B safely and earn a living; use your charts in the wrong way and you will hit the rocks and drown.

There are many myths perpetrated about using forex charts and if fall victim to them and you will lose.

The good news is anyone can become a successful forex chartist and if you follow basic rules, you can trade with the odds on your side and execute your forex trading signals correctly and win.

In part 2 of this article on forex technical analysis, we will look at basics points to incorporate into your forex trading plan, to be successful and look at common myths regarding forex charts you need to avoid.

Forex Charts are based on the forex market action involving price. Charts are a major tool in forex trading. There are many kinds of charts, each will help to visually analyze the forex market conditions, assess and create better forecasting, and identify forex market patterns and behavior.

Forex charts and spreads weigh heavily on the return on your trading strategy (this can have a huge affect on your profit or loss). As a trader, you are solely interested in buying low and selling high (like futures and commodities trading on Wall Street). Wider Forex charts and spreads means buying higher and having to sell lower.

A half-pip lower spread does not necessarily sound like much, but it can easily mean the difference between a profitable trade and one that losses money. The tighter the spread is the better things are going to be for you (Happy Days).

Nevertheless, tight Forex charts and spreads are only meaningful when they pair up with good execution of a well laid out trading strategy. A good example of this is, as you analyze your forex chart it shows a tight spread, but your trade shows it has filled, or mysteriously rejected.

When this occurs repeatedly, it means that your broker is showing tight Forex charts and spreads but is effectively delivering wider Forex charts and spreads. Rejected forex trades, delayed execution, slipping, and stop-hunting are strategies that some brokers use to get rid of the promise of tight Forex charts and spreads (so be on the look out for this type of activity and run fast if you notice it).

Both the technical and fundamental forex analyst uses Forex charts. The technical analyst analyzes the “micro” movements, trying to match the actual occurrence with known patterns. The fundamental analyst on the other hand tries to find correlation between the trend seen on the chart and “macro” events occurring parallel to that like (political and other events).

As you can imagine, reading and understanding forex charts can get confusing for the inexperienced trader. You can get most charts now online, as part of a subscription service, and they most often include frequent updates. Because technical analysis is such a popular method of forecasting and predicting movements in the forex market, there are many services available online.

If you would like to become more proficient in Forex chart techniques (and I highly recommend you do), joining a service that provides charts via the Internet, and assistance in reading and analyzing the chart information, this can be very helpful and profitable in the end.

So let us not talk a little about the different types of Forex Charts Line Charts The simplest form, based upon the closing rates (in each time unit), forming a homogeneous line. (Such charts, on the 5 minutes scale, will show a line connecting all the actual rates every 5 minutes).

This forex chart does not show what happened during the time unit selected by the viewer, only closing rates for such a time. Line Charts are the best simple way to chart for support and resistance levels.

Point and figure charts

Point and Figure Charts are charts based on price without time. Unlike most investment charts, point and figure charts do not present a linear representation of time. Instead, they show trends in price. A rising stack of Xs represents increases, and a declining stack of Os represents decreases.

This type of chart used to filter out non-significant price movements, and enable you (the trader) to determine critical support and resistance levels quickly.

Bar Chart

This chart shows three rates for each time unit selected: the high, the low, the closing (HLC). There are also bar charts including four rates (OHLC, which includes the opening rate for the period). This chart provides clearly visible information about trading prices range during the time period (per unit) selected (very valuable information).

Candlestick Chart

Kind of chart based on an ancient Japanese method. The chart represents prices at their opening, high, low, and closing rates, in a form of candles, for each time unit selected. The empty (transparent) candles show increase, while the dark (full) candles represent decrease.

The length of the body shows the range between opening and closing, while the whole candle (including top and bottom wicks) show the whole range of trading prices for the selected time unit. Pattern recognition is a field within the area of “machine learning”.

Alternatively defined as the act of take in raw data and taking an action based on the category of that data. As such, it is a collection of methods for “supervised learning”.

A complete pattern recognition system consist of a sensor that gathers the observations to be classified or described; a feature extraction mechanism that computes numeric or symbolic information from the observations; and a classification or description scheme that does the actual job of classifying or describing observations, relying on the extracted features.

In general, the forex market uses the following patterns in candlestick forex charts:

Bullish Patterns – hammer, inverted hammer, engulfing, harami, harami cross, doji start, piercing line, morning star, morning doji star.

Bearish Patterns – shooting star, hanging man, engulfing, harami, harami cross, doji star, dark cloud cover, evening star, evening doji.

Note: Keep in mind these are just general and not all-inclusive as the forex market is huge and are so with the charts and techniques.

Let us now look at the 5 top errors made where forex charts are concerned and why you should stay away from them.

1. Predicting with Forex Charts

A common mistake made by inexperienced forex traders (and some more seasoned),is thinking they need to predict to get profitable results – but of course this is simply hoping or guessing and is destined to see you lose. If you use charts the correct way, you will trade using the price changes and trends, you will not need to predict.

There is a big industry in forex trading that says prices move to a scientific theory and you know what will happen next – but of course, if prices did move to science, we would all know the price in advance and there would be no market.

Do not set yourself up and believe the prediction nonsense – make all your trades using reality of price change i.e. if a price comes to support, don’t predict support will hold, wait for it to move the other way and trade based on the fact it has held.

Another great way to trade is to trade now breakouts to new highs or lows – it is a proven fact that most big moves start from these breakouts, so you should make breakouts a consistent part of your forex trading strategy.

2. The More Inputs the Better

You may think five or six indicators must be better than one or two – very wrong!

The more inputs the more….

Live Forex Charts

There are two widespread theories as far as make a home forex charts are concerned: The original is by the most forex traders who believe too live forex charts can never be spent to win in a forex trade easily due to the fact that they rely on demand and supply fundamentals. On the a greater amount of hand, some investors presuppose that dwell forex graphs are a mirror reflection to a human mind; they are constant but prices can be predicted. Which is a truth and which is not? Live Forex Charts

The truth is that live currency graphs work and deliver results. There is however one common misconception that must be cleared even before we get into how live currency charts work. Contrary to common belief, live charts are not used as tools to predict future variations in pair prices. The truth is that unlike scientific theories, prices are not determined by fixed aspects. If this were the case, live charts would be very predictable, and there would be no point in trade in foreign exchange, would there? This, however, does not mean that live charts are not useful to the foreign exchange trade. As a matter of fact, live forex tables are some of the most important tools in use in foreign exchange trading. Combined with technical analysis, live currency graphs can be some of the most valuable assets an exchange trader can have in the business. Live Forex Charts

To understand how live graphs work, consider this equation:

Price = demand and Supply (fundamentals) + Investor psychology

In this case, the fundamentals (demand and supply) are less important because their value is determined by the actual course of events during the currency trade. Technical analysis and live charts work with the assumption that fundamentals are discounted and that the price of currency pairs are the actual determinants of the course of pricing. Live Forex Charts

Live foreign exchange graphs are works of art, not science. They have no fixed pattern, their variants are purely human and they are not entirely unpredictable. A trader must rely on live foreign exchange graphs to be successful in the foreign exchange trade because all foreign exchange trading strategies are based on currency tables. Leaning to use live currency graphs positively, provided that the investment is made in a profitable environment, it can make forex trading a simple and effective task for the trader. Always want to have financial freedom? Check out Live Forex Charts Program. It’ll change your Life Forever!