How To Read Forex Charts: 5 Things You Must Know.
Learning the basic skills in Forex, such as how to read Forex charts, is really important.
This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual Forex trading system.
By the time you finish this article, you'll learn how to read Forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded Forex before.
Firstly, let's revise the basics of a Forex trading as this relates directly to how to reade Forex charts.
Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.
And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.
Now let's have a look at the 5 important steps on how to read a Forex chart:
1. If you buy the currency pair, that is, you're long the position, realise that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.
On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.
Pretty simple so far.
2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.
So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.
3. On most Forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.
If you use the chart price to determine an entry or exit, realise that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.
If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A Forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.
Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".
4. Realise that the times shown on the bottom of Forex charts are set to the particular time zone that the Forex provider's charts are set to, be it GMT, New York time, or other time zones.
It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.
You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.
5. Finally, check whether the times on your Forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.
The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!
So there you have it.
You now have the 5 essential keys to how to properly read Forex charts, which will help you to avoid the common mistakes which many Forex beginners make when looking at charts, and which will speed up your progress when you're looking at Forex charting packages, and Forex trading systems that you want to trade!
Now that you know this, practice looking at Forex charts with each of these 5 points in mind.

Forex Tutorial: Reading a Forex Quote and Understanding the Jargon.
One of the biggest sources of confusion for those new to the currency market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in currency pair trades.
Reading a Quote.
When a currency is quoted, it is done in relation to another currency, so that the value of one is reflected through the value of another. Therefore, if you are trying to determine the exchange rate between the U. S. dollar (USD) and the Japanese yen (JPY), the forex quote would look like this:
This is referred to as a currency pair. The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. The base currency (in this case, the U. S. dollar) is always equal to one unit (in this case, US$1), and the quoted currency (in this case, the Japanese yen) is what that one base unit is equivalent to in the other currency. The quote means that US$1 = 119.50 Japanese yen. In other words, US$1 can buy 119.50 Japanese yen. The forex quote includes the currency abbreviations for the currencies in question.
Direct Currency Quote vs. Indirect Currency Quote.
There are two ways to quote a currency pair, either directly or indirectly. A direct currency quote is simply a currency pair in which the domestic currency is the quoted currency; while an indirect quote, is a currency pair where the domestic currency is the base currency. So if you were looking at the Canadian dollar as the domestic currency and U. S. dollar as the foreign currency, a direct quote would be USD/CAD, while an indirect quote would be CAD/USD. The direct quote varies the domestic currency, and the base, or foreign currency, remains fixed at one unit. In the indirect quote, on the other hand, the foreign currency is variable and the domestic currency is fixed at one unit.
For example, if Canada is the domestic currency, a direct quote would be 1.18 USD/CAD and means that USD$1 will purchase C$1.18 . The indirect quote for this would be the inverse (1/1.18), 0.85 CAD/USD, which means with C$1, you can purchase US$0.85.
In the forex spot market, most currencies are traded against the U. S. dollar, and the U. S. dollar is frequently the base currency in the currency pair. In these cases, it is called a direct quote. This would apply to the above USD/JPY currency pair, which indicates that US$1 is equal to 119.50 Japanese yen.
However, not all currencies have the U. S. dollar as the base. The Queen's currencies - those currencies that historically have had a tie with Britain, such as the British pound, Australian Dollar and New Zealand dollar - are all quoted as the base currency against the U. S. dollar. The euro, which is relatively new, is quoted the same way as well. In these cases, the U. S. dollar is the counter currency, and the exchange rate is referred to as an indirect quote. This is why the EUR/USD quote is given as 1.25, for example, because it means that one euro is the equivalent of 1.25 U. S. dollars.
Most currency exchange rates are quoted out to four digits after the decimal place, with the exception of the Japanese yen (JPY), which is quoted out to two decimal places.
When a currency quote is given without the U. S. dollar as one of its components, this is called a cross currency. The most common cross currency pairs are the EUR/GBP, EUR/CHF and EUR/JPY. These currency pairs expand the trading possibilities in the forex market, but it is important to note that they do not have as much of a following (for example, not as actively traded) as pairs that include the U. S. dollar, which also are called the majors. (For more on cross currency, see Make The Currency Cross Your Boss .)
As with most trading in the financial markets, when you are trading a currency pair there is a bid price (buy) and an ask price (sell). Again, these are in relation to the base currency. When buying a currency pair (going long), the ask price refers to the amount of quoted currency that has to be paid in order to buy one unit of the base currency, or how much the market will sell one unit of the base currency for in relation to the quoted currency.
The bid price is used when selling a currency pair (going short) and reflects how much of the quoted currency will be obtained when selling one unit of the base currency, or how much the market will pay for the quoted currency in relation to the base currency.
The quote before the slash is the bid price, and the two digits after the slash represent the ask price (only the last two digits of the full price are typically quoted). Note that the bid price is always smaller than the ask price. Let's look at an example:
If you want to buy this currency pair, this means that you intend to buy the base currency and are therefore looking at the ask price to see how much (in Canadian dollars) the market will charge for U. S. dollars. According to the ask price, you can buy one U. S. dollar with 1.2005 Canadian dollars.
However, in order to sell this currency pair, or sell the base currency in exchange for the quoted currency, you would look at the bid price. It tells you that the market will buy US$1 base currency (you will be selling the market the base currency) for a price equivalent to 1.2000 Canadian dollars, which is the quoted currency.
Whichever currency is quoted first (the base currency) is always the one in which the transaction is being conducted. You either buy or sell the base currency. Depending on what currency you want to use to buy or sell the base with, you refer to the corresponding currency pair spot exchange rate to determine the price.
The difference between the bid price and the ask price is called a spread. If we were to look at the following quote: EUR/USD = 1.2500/03, the spread would be 0.0003 or 3 pips, also known as points. Although these movements may seem insignificant, even the smallest point change can result in thousands of dollars being made or lost due to leverage. Again, this is one of the reasons that speculators are so attracted to the forex market; even the tiniest price movement can result in huge profit.
The pip is the smallest amount a price can move in any currency quote. In the case of the U. S. dollar, euro, British pound or Swiss franc, one pip would be 0.0001. With the Japanese yen, one pip would be 0.01, because this currency is quoted to two decimal places. So, in a forex quote of USD/CHF, the pip would be 0.0001 Swiss francs. Most currencies trade within a range of 100 to 150 pips a day.
Currency Pairs in the Forwards and Futures Markets.
One of the key technical differences between the forex markets is the way currencies are quoted. In the forwards or futures markets, foreign exchange always is quoted against the U. S. dollar. This means that pricing is done in terms of how many U. S. dollars are needed to buy one unit of the other currency. Remember that in the spot market some currencies are quoted against the U. S. dollar, while for others, the U. S. dollar is being quoted against them. As such, the forwards/futures market and the spot market quotes will not always be parallel one another.
For example, in the spot market, the British pound is quoted against the U. S. dollar as GBP/USD. This is the same way it would be quoted in the forwards and futures markets. Thus, when the British pound strengthens against the U. S. dollar in the spot market, it will also rise in the forwards and futures markets.
On the other hand, when looking at the exchange rate for the U. S. dollar and the Japanese yen, the former is quoted against the latter. In the spot market, the quote would be 115 for example, which means that one U. S. dollar would buy 115 Japanese yen. In the futures market, it would be quoted as (1/115) or .0087, which means that 1 Japanese yen would buy .0087 U. S. dollars. As such, a rise in the USD/JPY spot rate would equate to a decline in the JPY futures rate because the U. S. dollar would have strengthened against the Japanese yen and therefore one Japanese yen would buy less U. S. dollars.
Now that you know a little bit about how currencies are quoted, let's move on to the benefits and risks involved with trading forex.

How to read forex charts properly

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First step you have to do is by observing for up - to-date currency chart information. It is extremely important to able to read the currency charts accurately, be sure to get an access from a legitimate provider. For beginners, currency trading profits can be gained using a chart which offered by trusted brokerage services. There are many online brokerage services available on internet, they offer sophisticating services like currency charts to help understanding an up - to date current pricing.
Set the time frame is the next way to consider on reading forex chart. The values are available commonly only relevant to the specific time frames you have built. Crop your chart for specified time frame by using a paper chart. They usually used to change the view to a specific time frame such as 1 day, 5 days, 1 month and over.
At last, observation becomes the forex chart strategy can’t be separated from many traders. Fluctuations changes is a need that you have to understand on this step. Look at the line graph against an Y axis line. Horizontal axis known as Y axis shows you for a currency chart tends to comparative asset price. In the specified condition, it shows you the way your selected currency works against the currency which is represented by Y axis line.

How to Read Forex Charts. The Ultimate Guide for Beginners.
Fundamental, technical, quantitative. В There are a number of methods used by forex traders to predict the movements of currency pairs. Some traders focus on news, interest rates and economic variables while others prefer to useВ charting toolsВ and indicators to guide their trading decisions.
Table of Contents.
However, no matter your trading method, you'll need to know how to read a forex chart - there's no escaping it. Luckily, we created this detailed guide to help you get started.
You must crawl before you can walk.  And forex charting is no different – you first need to have a good understanding of the basics, before you can progress to advanced stuff.
Lets get started.
Market Insights and Trade Ideas from a Professional Trader.
What is Forex?
Forex is short for вЂ˜foreign exchange’ – the game of buying and selling various currencies in the foreign exchange market.
In the global foreign exchange market, retailers, investors, speculators and institutions determine the relative value for the conversion of one currency to another via the buying a selling of currency pairs.
It’s a dynamic, liquid marketplace with daily turnover predicted to be in excess of 5.3 trillion dollars.
How to Read a Currency Quote?
Forex is the business of conversion, and since you are always comparing the value of one currency to another, forex is always В quoted in pairs. В В.
For example, the quote ofВ EUR/USDВ shows how many US dollars you will get for one Euro.
The first currency is called the base ; the second is called the quote . When you buy a currency pair, you buy the base currency, and sell the quote currency. Simple.
What is a Pip?
The most popular piece of terminology used by forex tradersВ has got to be the humble вЂ˜ pip ’.В В.
A pip is simply a unit you count profit or loss in. В В.
Typically, forex pairs are quoted to four decimal places (0.0001).В The вЂ˜1’, four spaces after the 0, is what is referred to as a pip. В В.
If a trader buysВ GBP/USDВ for 1.6000 and then later on sells it for 1.6020, that's a difference of 0.0020 or 20 pips. В В.
The exception to this is Yen pairs ( i. e.В USD/JPY), which are only quoted to two decimal places. В In this case the second spot after the 0 is referred to as a pip.
Now that you're up to speed, lets move on to what you really came for, how to read a forex chart.
What is a Forex Chart?
AВ forex chartВ is simply a graphical depiction of the exchange rate between to currencies. В.
It shows how the exchange rate of currency pair has changed over time. В.
For example, the chart above (Euro vs. U. S. Dollar) shows how the exchange rate between Euros and US dollars has fluctuated over time. В.
Forex charts can be plotted for variety of currency pairs, from major pairs like EUR/USD andВ GBP/USDВ to minor pairs such as AUD/CAD and NZD/JPY. В.
The choice is yours.
How do Forex Chart Timeframes work?
The amount of time shown on the chart depends on the particular timeframe you select. В.
By default, our forex charts are set to daily (1D) timeframes. В.
What this means is that each point on the graph, whether it be a line, candle or bar represents the trading data for one day. В.
If you were to change the timeframe to a 60 minute chart , each point on the chart would now represent 60 minutes worth of trading data. Example below:
With most free forex charting tools you can choose to display timeframes from as low as 1 minute all the way up to one month. If get more advanced charting software, you can view lower timeframes.
Types of Forex Charts.
Forex traders have developed several types of forex charts to help depict trading data. В.
The three main chart types are line, bar, and candlesticks.
For forex traders, candlestick charts seem to be the crowd favourite, and it’s easy to see why. В.
Compared to a line chart, which shows the price close to close, candlestick charts show four times the amount of information, displaying the close, open, low and high price of a given period. В.
By having this extra information, you can study вЂ˜ how ’ price has moved over a period of time compared to just seeing where the price closed.
The red and green portions of a candle are termed the вЂ˜body’.В.
The body of a candlestick represents the difference between the opening and closing price of the currency for a given time period. В.
If the opening price of the candle is lower than the closing price, the candle bodyВ color is green. If the opposite occurs, and the opening price is higher than the closing price then the candle body color isВ red. В.
The black lines above and below the candles are called вЂ˜wicks’ or вЂ˜shadows’.В.
Wicks represent the highest and lowest prices reached during the given time period.
An Overview of Forex Indicators.
Currency chartsВ help traders evaluate market behaviour, and help them determine where the currency will be in the future. В.
To help make sense of the currency movements depicted on a chart, traders have developed a number of different visual guides to assist them – indicators.
There are hundreds of different types of tradingВ indicators developed to cover every aspect of forex trading, from trend following to mean reversion. В.
Below we cover some of the most popular indicators used by currency traders.
Bollinger Bands.
Bollinger Bands are volatility bands placed x standard deviations around a moving average. Developed by John Bollinger, the bands widen in periods of increasing volatility and narrow when volatility decreases.
From a traditional perspective, the bands are used to highlight potential oversold and overbought areas. В.
For example, if a price move breaches the upper band, it might be expected that the price would then revert back to its mean, or in this case the middle moving average.
Middle Moving Average = 20 period simple moving average (20 SMA).
Upper Band = 20 SMA plus the 20 period standard deviation multiplied by 2.
Lower Band = 20 SMA minus the 20 period standard deviation multiplied by 2.
Relative Strength Index (RSI)
Developed by J. Welles Wilder the Relative Strength Index (RSI) is a momentum oscillator which measures the direction and velocity of price movements. В.
The indicator compares upward price movements in the closing price to downward movements in the closing price over certain time periods. The default period, suggested by Wilder, is 14 periods.
RSI = 100 – 100 / (1 + RS)В.
Where RS equals Average Gain divided by Average Loss.
Average Gain = [(Sum of gains over previous 14 periods / 14) * 13 + current gain] / 14.
Average Loss = [(Sum of losses over previous 14 periods / 14) * 13 + current loss] / 14.
Simple Moving Average Line.
SMA or simple moving average is the most common indicator plotted on forex charts. В.
Moving averages are used as they help smooth price fluctuations over a certain period, giving the trader a clearer picture of the direction of the price movement.
SMA = Sum of the closing prices / number of periods.