In Forex, you can come across lines, candles, mountains, and many other types of charts. They also have different time frames.

Depending on your preferences, you can see the price movements during the past day or even a year. Most of the Forex brokers will provide you with a trading platform, which you can use to access Forex charts. In our guide to Forex exchange charts, we will cover different aspects of Forex charts.

So, if you want to learn how to read charts, follow our guide and understand how you can use them for the best outcome. Forex market charts show price movements in a very simple way. On the chart, you can see that there is an x-axis, which is the horizontal line of the chart, and the y-axis, the vertical line.

The x-axis of the Forex trading chart shows the time frame of the chart, while the vertical line indicates the price of the currency pair.

In the majority of cases, you will find different types of charts in the trading platform offered by the broker you are using. Thanks to the trading platforms, you will be able to access the charts with both, live and demo accounts. On the other hand, you can also use third-party applications and software that will give you access to special types of charts. There are numerous charting solutions offered to traders who want to dive deep into technical analysis, for which, using charts is an essential factor.

As you might already have heard, in Forex trading, the prices of the currency pairs are constantly changing. You will see that sometimes the prices are going up, while other times they are going down. Thanks to Forex charts, you can very easily identify uptrends and downtrends. This way, you will know the history of the currency pair. This might be very important information. If you know that something very important happened at some point during history, you will be able to understand how it affected the price movements.

After this, you can use this information in your future trades: if something similar happens, you will have an easier time understanding which direction the prices are more likely to take. As we have already said, there are dozens of different Forex chart types available in the market. Depending on the Forex broker and trading platform you are using, you will have access to different types of them. Among the most popular variations of Forex trading charts are:.

While with design these charts might be a little different, the general idea is the same — to show traders the major trends of the market. Every chart, however, shows the price movements in a different manner. While some focus on details, others only show the most important, general information. Customize your charts with XM MT4. For many traders, the first thing that comes to mind when you are talking about Forex trading is the candles.

These candles have become so famous because of the candlestick chart. This chart combines very detailed information in just one place.

It should not come as a surprise that this is one of the most popular charts in Forex. Candlestick charts give you information about not only the changes that are happening in the market, but also give you detailed information about the whole price movements. In total, this type of chart will give you information about four different prices in a longer time frame. You can set the time frame most suitable for you according to your preferences.

When you look at the candlestick chart, you will see different types of candles, the space between the short vertical lines in the candlestick chart is called the real body of the candle.

Depending on the broker and trading platform you are using, the color distribution will be different. Generally, if the real body is green or white, it means that the opening price was lower than the closing price. On the other hand, if the real body is either black or red, it means that the opening price was higher than the closing price.

Sometimes, these bodies also have a narrow line on top of them. This line is called upper shadow and it shows the highest price point during the trading day. There also is a different line that is below the real body. This line is called lower shadow, and it indicates the lowest price point of the given trading day. Sometimes called a better candlestick, Heiken Ashi is among the most popular trading Forex charts globally. In a sense, this chart is very similar to the regular Japanese Candlestick Charts, in fact, many traders are having a very hard time differentiating these two.

But, there are some distinctive differences between Heiken Ashi and Candlestick charts. The biggest difference that every trader should know about is the fact that, unlike candlestick charts, Heiken Ashi offers traders information in a much simpler way.

This chart will give you only the most important, general information about the currency trading market. You will be able to see the major trends in the market. You can tell the average high and average of the day, and the general trend that the market has. This chart was also developed and created in Japan and it shows price movements in specific colors. As we have already said, Heiken Ashi is one of the most used Forex charts globally.

One of the main reasons for this is the simple design and user-friendliness of this chart. One of the major reasons why so many people use this chart is that it makes analyzing processes much easier. This is especially true for beginners, who are having a hard time understanding the information that they get from Candlestick Chart.

As we have already noted, the open and close levels in the Heiken Ashi chart are calculated in averages. Simply put, it shows the midpoint of the previous bar. When it comes to Forex charts meaning, to put it the simplest way possible, it is something that shows you price movements in a specific timeframe. Just by looking at a line chart, you will be able to very easily tell how the prices are moving in the market.

What a line chart does is that it marks various price points of a currency pair and, after this, it connects the neighboring points to each other. The result of this connection is represented as lines. Although this chart is very easy to understand for the major chart trends, it does not give traders detailed information about the market movements. This might be a huge disadvantage for many. However, keep in mind that this is specifically created for those who want to see the major trends in the market, without any additional information.

Unlike other charts, for example, the candlestick and Heiken Ashi, this chart does not show the close or open price of the trading day. Because of this, not everyone uses this chart, but for general ideas and information about the going events in the market, line charts can be very helpful for many traders. If you are someone who wants to get complex information about the market, it would be better if you used charts such as Candlestick or Heiken Ashi.

If you have ever seen the mountain and line chart together, you will be able to see that there are many things that these two have in common. The thing is, they work in a very simple and similar way — they show only the trends of the market. However, there still is a difference, but mostly about the design. Unlike line charts, Mountain charts have the space below them filled with a color.

Sometimes they are also called area charts because of the way they look. It has dips and peaks, and because it looks like a side of a mountain, it is called a mountain chart. If you are someone who wants does not want to go in-depth about the price movements and only wants to grasp the major changes over time, this chart will be very helpful for you. Unlike like and mountain charts, and much like Heiken Ashi and Japanese Candlestick charts, Bar charts will give you complex and detailed information about the Forex trading market.

In a given timeframe, the bar chart is capable of showing you information about four different prices of the currency pair. The bar chart has two ends, top, and bottom.

The top end of the bar shows you the highest price point, while the bottom end shows you the lowest price point of the currency pair during the trading day. You can also see a short vertical line on the left side of the chart, which shows the opening price, and the same line on the right side of the bar will show you the closing price of the currency pair during the trading day.

There are many traders who are using this chart because of the fact that it gives traders very detailed information. However, candlestick and Heiken Ashi charts, which we have already discussed, are much easier to understand for traders. The major reason for it is that they show market movements in different colors, making it easier for traders to understand the major trends of the market, while also getting detailed information about price changes.

Throughout this guide, we have discussed some of the most popular Forex trading charts, however, there is much more that you might come across while trading Forex. Some Forex brokers even offer advanced Forex charts that were created especially for their clients.

In most cases, these charts feature different types of indicators and drawing tools, making trading much easier for beginners. Using indicators might be a very good choice for beginners and experienced traders alike. The spot market is where currencies are bought and sold based on their trading price. That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.

A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement.

A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets. A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price.

Futures trade on exchanges and not OTC. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME. In the United States, the National Futures Association NFA regulates the futures market.

Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterparty to the trader, providing clearance and settlement services. Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire.

The currency forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. In addition to forwards and futures, options contracts are also traded on certain currency pairs. Forex options give holders the right, but not the obligation, to enter into a forex trade at a future date and for a pre-set exchange rate, before the option expires.

Unlike the spot market, the forwards, futures, and options markets do not trade actual currencies. Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement. This is why they are known as derivatives markets. Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market.

Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed. To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate.

For example, imagine that a company plans to sell U. Unfortunately, the U. dollar begins to rise in value vs. A stronger dollar resulted in a much smaller profit than expected.

The blender company could have reduced this risk by short selling the euro and buying the U. dollar when they were at parity. That way, if the U. dollar rose in value, then the profits from the trade would offset the reduced profit from the sale of blenders. If the U. dollar fell in value, then the more favorable exchange rate would increase the profit from the sale of blenders, which offsets the losses in the trade.

Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world. Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect the supply and demand for currencies, creating daily volatility in the forex markets.

A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs. The trader believes higher U.

If the investor had shorted the AUD and went long on the USD, then they would have profited from the change in value. Trading forex is similar to equity trading. Here are some steps to get yourself started on the forex trading journey. Learn about forex: While it is not complicated, forex trading is a project of its own and requires specialized knowledge. For example, the leverage ratio for forex trades is higher than for equities, and the drivers for currency price movement are different from those for equity markets.

There are several online courses available for beginners that teach the ins and outs of forex trading. Set up a brokerage account: You will need a forex trading account at a brokerage to get started with forex trading. Forex brokers do not charge commissions. Instead, they make money through spreads also known as pips between the buying and selling prices. For beginner traders, it is a good idea to set up a micro forex trading account with low capital requirements.

Such accounts have variable trading limits and allow brokers to limit their trades to amounts as low as 1, units of a currency. For context, a standard account lot is equal to , currency units. A micro forex account will help you become more comfortable with forex trading and determine your trading style.

Develop a trading strategy: While it is not always possible to predict and time market movement, having a trading strategy will help you set broad guidelines and a road map for trading. A good trading strategy is based on the reality of your situation and finances. It takes into account the amount of cash that you are willing to put up for trading and, correspondingly, the amount of risk that you can tolerate without getting burned out of your position.

Remember, forex trading is mostly a high-leverage environment. But it also offers more rewards to those who are willing to take the risk. Always be on top of your numbers: Once you begin trading, always check your positions at the end of the day. Most trading software already provides a daily accounting of trades.

Make sure that you do not have any pending positions to be filled out and that you have sufficient cash in your account to make future trades. Cultivate emotional equilibrium: Beginner forex trading is fraught with emotional roller coasters and unanswered questions. Should you have held onto your position a bit longer for more profits? How did you miss that report about low gross domestic product GDP numbers that led to a decline in overall value of your portfolio?

Obsessing over such unanswered questions can lead you down a path of confusion. That is why it is important to not get carried away by your trading positions and cultivate emotional equilibrium across profits and losses. Be disciplined about closing out your positions when necessary.

The best way to get started on the forex journey is to learn its language. Here are a few terms to get you started:. Remember that the trading limit for each lot includes margin money used for leverage. This means that the broker can provide you with capital in a predetermined ratio. The most basic forms of forex trades are a long trade and a short trade. In a long trade, the trader is betting that the currency price will increase in the future and they can profit from it. Traders can also use trading strategies based on technical analysis, such as breakout and moving average , to fine-tune their approach to trading.

Depending on the duration and numbers for trading, trading strategies can be categorized into four further types:. Three types of charts are used in forex trading. They are:. Line charts are used to identify big-picture trends for a currency. They are the most basic and common type of chart used by forex traders.

They display the closing trading price for the currency for the time periods specified by the user. The trend lines identified in a line chart can be used to devise trading strategies. For example, you can use the information contained in a trend line to identify breakouts or a change in trend for rising or declining prices. While it can be useful, a line chart is generally used as a starting point for further trading analysis.

Much like other instances in which they are used, bar charts are used to represent specific time periods for trading. They provide more price information than line charts. Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price OHLC for a trade. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined.

Candlestick charts were first used by Japanese rice traders in the 18th century. They are visually more appealing and easier to read than the chart types described above. The upper portion of a candle is used for the opening price and highest price point used by a currency, and the lower portion of a candle is used to indicate the closing price and lowest price point. A down candle represents a period of declining prices and is shaded red or black, while an up candle is a period of increasing prices and is shaded green or white.

The formations and shapes in candlestick charts are used to identify market direction and movement. Some of the more common formations for candlestick charts are hanging man and shooting star. Forex markets are the largest in terms of daily trading volume in the world and therefore offer the most liquidity. This makes it easy to enter and exit a position in any of the major currencies within a fraction of a second for a small spread in most market conditions.

The forex market is traded 24 hours a day, five and a half days a week—starting each day in Australia and ending in New York. The broad time horizon and coverage offer traders several opportunities to make profits or cover losses. The major forex market centers are Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich. The extensive use of leverage in forex trading means that you can start with little capital and multiply your profits.

Forex trading generally follows the same rules as regular trading and requires much less initial capital; therefore, it is easier to start trading forex compared to stocks. The forex market is more decentralized than traditional stock or bond markets. There is no centralized exchange that dominates currency trade operations, and the potential for manipulation—through insider information about a company or stock—is lower.

Even though they are the most liquid markets in the world, forex trades are much more volatile than regular markets. Banks, brokers, and dealers in the forex markets allow a high amount of leverage, which means that traders can control large positions with relatively little money of their own. Leverage in the range of is not uncommon in forex. A trader must understand the use of leverage and the risks that leverage introduces in an account.

Trading currencies productively requires an understanding of economic fundamentals and indicators. A currency trader needs to have a big-picture understanding of the economies of the various countries and their interconnectedness to grasp the fundamentals that drive currency values. The decentralized nature of forex markets means that it is less accountable to regulation than other financial markets.

The extent and nature of regulation in forex markets depend on the jurisdiction of trading. Forex markets lack instruments that provide regular income, such as regular dividend payments, which might make them attractive to investors who are not interested in exponential returns. Companies and traders use forex for two main reasons: speculation and hedging.

The former is used by traders to make money off the rise and fall of currency prices, while the latter is used to lock in prices for manufacturing and sales in overseas markets. Forex markets are among the most liquid markets in the world. Hence, they tend to be less volatile than other markets, such as real estate. The volatility of a particular currency is a function of multiple factors, such as the politics and economics of its country. Therefore, events like economic instability in the form of a payment default or imbalance in trading relationships with another currency can result in significant volatility.

Forex trade regulation depends on the jurisdiction. Countries like the United States have sophisticated infrastructure and markets to conduct forex trades. Hence, forex trades are tightly regulated there by the National Futures Association NFA and the Commodity Futures Trading Commission CFTC. However, due to the heavy use of leverage in forex trades, developing countries like India and China have restrictions on the firms and capital to be used in forex trading.

Europe is the largest market for forex trades. The Financial Conduct Authority FCA is responsible for monitoring and regulating forex trades in the United Kingdom.

Currencies with high liquidity have a ready market and therefore exhibit smooth and predictable price action in response to external events. The U. dollar is the most traded currency in the world. It features in six of the seven currency pairs with the most liquidit y in the markets.

Forex FX is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. Trading currencies can be risky and complex. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing.

Retail investors should spend time learning about the forex market and then researching which forex broker to sign up with, and find out whether it is regulated in the United States or the United Kingdom U. and U. dealers have more oversight or in a country with more lax rules and oversight.

It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent. Read on to learn about the forex markets, what it's used for, and how you can get started trading. The foreign exchange market is where currencies are traded. Currencies are important because they allow us to purchase goods and services locally and across borders.

International currencies need to be exchanged to conduct foreign trade and business. If you are living in the United States and want to buy cheese from France, then either you or the company from which you buy the cheese has to pay the French for the cheese in euros EUR. This means that the U. importer would have to exchange the equivalent value of U. dollars USD for euros. The same goes for traveling. The tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over the counter OTC , which means that all transactions occur via computer networks among traders around the world, rather than on one centralized exchange.

The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich—across almost every time zone.

This means that when the U. trading day ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active anytime, with price quotes changing constantly.

These terms are synonymous and all refer to the forex market. In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services.

However, the forex market, as we understand it today, is a relatively modern invention. After the Bretton Woods accord began to collapse in , more currencies were allowed to float freely against one another. The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services. Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors.

There are two distinct features of currencies as an asset class :. An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Prior to the financial crisis, it was very common to short the Japanese yen JPY and buy British pounds GBP because the interest rate differential was very large.

This strategy is sometimes referred to as a carry trade. Currency trading was very difficult for individual investors prior to the Internet. Most currency traders were large multinational corporations , hedge funds , or high-net-worth individuals HNWIs because forex trading required a lot of capital. With help from the Internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets through either the banks themselves or brokers making a secondary market.

Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance. The FX market is where currencies are traded. It is the only truly continuous and nonstop trading market in the world.

In the past, the forex market was dominated by institutional firms and large banks, which acted on behalf of clients. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. An interesting aspect of world forex markets is that there are no physical buildings that function as trading venues for the markets. Instead, it is a series of connections made through trading terminals and computer networks.

Participants in this market are institutions, investment banks, commercial banks, and retail investors.

The foreign exchange market is considered more opaque than other financial markets. Currencies are traded in OTC markets, where disclosures are not mandatory. Large liquidity pools from institutional firms are a prevalent feature of the market. A survey found that the motives of large financial institutions played the most important role in determining currency prices.

Forex is traded primarily via three venues: spot markets, forwards markets, and futures markets. When people refer to the forex market, they are thus usually referring to the spot market. The forwards and futures markets tend to be more popular with companies or financial firms that need to hedge their foreign exchange risks out to a specific date in the future. Forex trading in the spot market has always been the largest because it trades in the biggest underlying real asset for the forwards and futures markets.

Previously, volumes in the forwards and futures markets surpassed those of the spot markets. However, the trading volumes for forex spot markets received a boost with the advent of electronic trading and the proliferation of forex brokers. The spot market is where currencies are bought and sold based on their trading price.

That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.

A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value.

After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement. A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets.

A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price. Futures trade on exchanges and not OTC. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME.

In the United States, the National Futures Association NFA regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized.

The exchange acts as a counterparty to the trader, providing clearance and settlement services. Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The currency forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

In addition to forwards and futures, options contracts are also traded on certain currency pairs. Forex options give holders the right, but not the obligation, to enter into a forex trade at a future date and for a pre-set exchange rate, before the option expires.

Unlike the spot market, the forwards, futures, and options markets do not trade actual currencies. Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement.

This is why they are known as derivatives markets. Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market. Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed. To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate.

For example, imagine that a company plans to sell U. Unfortunately, the U. dollar begins to rise in value vs. A stronger dollar resulted in a much smaller profit than expected.

The blender company could have reduced this risk by short selling the euro and buying the U. dollar when they were at parity. That way, if the U. dollar rose in value, then the profits from the trade would offset the reduced profit from the sale of blenders.

If the U. dollar fell in value, then the more favorable exchange rate would increase the profit from the sale of blenders, which offsets the losses in the trade. Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world.

Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect the supply and demand for currencies, creating daily volatility in the forex markets. A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs.

The trader believes higher U. If the investor had shorted the AUD and went long on the USD, then they would have profited from the change in value.

NO DEPOSIT. In Forex, you can come across lines, candles, mountains, and many other types of charts. For instance, using Stochastics , a reading of above 80 implies overbought conditions and traders will look to sell; whereas a reading of below 20 implies oversold conditions and traders will look to buy the underlying asset. However, you might find that one particular type of forex chart is easier to read than another. Related Terms. Develop a trading strategy: While it is not always possible to predict and time market movement, having a trading strategy will help you set broad guidelines and a road map for trading. Candlestick charts are the most commonly used display method for indicating the price on a forex chart.

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