If you have interest to learn market analysis, you will need an access to a forex live chart. This chart is created at once by using current market data, so you can have actual data on market movement during that period. Basically, it is a very useful information tool to have even if you don’t do your own analysis.
First of all, you have to pick the currency pair that you want to analyze; it usually comes in the form of a drop down menu. After you find the one you want, select the chart type, it usually comes in 4 forms: Line, Bar, Candlestick, and Table. If you are a beginner, I suggest start with a Bar type. Once you select the type, choose a time frame such as one minute, five minutes, daily, weekly, etc.
In a bar chart, each vertical bar that you see represents a time frame. The bar at the top is the top price and the bar at the bottom is the bottom price for that specific time frame. For each vertical bar, there are two horizontal bars, one to the left and the other to the right. The bar at the left is the opening price while the bar at the right is the closing price for that specific period of time. Note: Utilize the zoom feature to see it in detail. Usually, charting is a standard feature in a trading platform, read more about it at forex trading platforms.
There are some things that you need to know when using forex live chart:
Understanding Support and Resistance
The market volatility can bring it anywhere and no one can predict it 100%. But based on historical data, there are some condition where the price doesn’t exceed or below a certain price for a period of time.
Example:
-From July to December, the EUR/USD prices never exceed 1.645, that means 1.645 is the resistance for EUR/USD during that period.
- From January to May, the USD/JPY prices never fall below 90.070, that mean 90.70 is the support for USD/JPY during that period.
These support and resistance data can be used to decide entry point. A conservative method is buying at support and sells at resistance. There is also more advanced strategy such as buying at resistance breakout and sell at higher price; it is all depend on the currency, circumstances, and your trading system.
Note: A time when the price has moved passed support or resistance line is called breakout.
Today, there are various easier ways to decide entry point, read about it at forex trading signals.
Indicators
A good charting tool will at least have the feature to add various indicators. Indicator is a mathematical calculation based on prices that can be used to help you make decision. For example: MVA indicator can show you the average price for a certain period, EMA show you the weighted price calculation for a certain period, etc.
Back Testing
A lot of trader use forex live chart to do back testing for their system. They test their systems against the chart data on a specific period of time and see if the system is profitable or not. What usually happen is when the system doesn’t works well, they adjust it so it can make profitable orders from that data.
This is a huge mistake and usually the system will collapse immediately when applied to the current market. Back testing is good and you definitely can use the chart for that, but you also need to test the system in the current market for at least two or three months before decide that it is works or not. Using a dummy account is a good idea for this test.
There are various ways to use a forex live chart in order to boost your trading and learning the basic of using it is a great beginning for your career as a trader. If you interesting to know more about forex trading, visit learn currency trading.