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Charts and Trends as Technical Analysis Tools
Trends and Charts: Foreign Exchange Trends
The foreign exchange market has been in existence for more than 100 years and all technical data have been systematically recorded for future use. During this time forex trends have formed and these forex trading trends tend to repeat themselves periodically. These trends and patterns have been proved to be fairly reliable and consistent and are therefore invaluable to Forex traders. Forex charts and trends will aid traders in becoming successful in predicting market directions as traders know that price movements are governed by forex trends and online forex trends.
Forex trading trends may last for months or even years. Forex technical analysis has proven that once foreign exchange trends are in motion, they tend to keep on moving and therefore traders will usually trade with trends and not against it.
Foreign currency trends may be subdivided into three different time frames that will result in different trading opportunities:
Longer Term Currency Trends are foreign exchange trends that indicate and dictate the underlying economic wellbeing of the country that is represented by the currency. These economic trends may last for months or even years.
Intermediate Currency Trends are foreign exchange trends within the main trend that are shorter lived. These economic trends may last for days or a couple of weeks.
Daily Currency Trends are currency trends that occur within a 24 hour period.
Trends and Charts: Charts
Forex charts are the main tool used for technical analysts by traders. Traders use these Forex charts to look for patterns, abnormalities and variations in price movements in order to predict possible future price movements. These Forex charts are graphs indicating price movement versus a certain time frame. Most charting systems will allow you to add technical analysis tools as overlays on your chart. Price movements may be indicated by means of the line chart, the bar chart or candlestick chart.
The line currency chart is used to present the direction of movement of the market, in either an up, down or sideways direction. The bar currency chart uses single graphical bars to present a single period of time. Each single bar is subdivided into 4 marks that represent the highest point, the lowest point, the opening point and the closing point.
The candlestick currency chart also shows market movement for a set period of time. The body of the candlestick will change color when the market moves up (bullish market) and will revert back on a bearish market. Candlestick foreign currency trading charts are the most popular chart used for indicating price movement on a forex chart.
All of the above forex trading charts and online forex charts may be divided into many different time periods, ranging from minutes to hours, weeks and months. Traders use charts and associated time frames that they are most comfortable with.
Forex charting is considered an art and not relied on as pure science. Understanding forex charts and forex trends will not always lead to winning trades, but will aid traders in making educated guesses.