FOREX TECHNICAL ANALYSIS
Basic education on forex technical analysis
There are 3 types of charts:
- A Line Chart simply shows a line from one closing price to the next closing price
- When strung together with a line, we can see the general price movement of a currency pair over a period of time.
Here is an example of a line chart
- A bar chart is a little more complex compared to a linechart.
- It shows the opening and closing prices, as well as the highs and lows.
Here is an example of a Bar chart
- The vertical bar itself indicates the currency pair’s trading range as a whole.
- The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid.
- The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.
- Candlestick charts show the same price information as a bar chart, but in a prettier, graphic format.
- A candlestick chart also shows the opening and closing prices in addition to the high and low of the specified period and resembles a candlestick. This type of chart is easier to interpret and identify pivot points or reversals in a trend.
Here is an example of a Candlestick chart
- However, in candlestick reading, the larger block in the middle, indicates the range between the opening and closing prices.
- Traditionally, if a block is filled or colored in, then the currency pair closed lower than it opened.
- In the following example, the ‘filled color’ is red. For our ‘filled’ blocks, the top of the block is the opening price, and the bottom of the block is the closing price.
- If the closing price is higher than the opening price, then the block in the middle will be “white” or hollow or unfilled but in our example it is filled with green color.
Once you have familiarised yourself with the information and concepts, you can open a Demo Trading Account to practice what you have learnt and build on your knowledge and understanding of how to trade successfully. Treat your demo account as you would your real account.