As you start Forex trading you should learn how to read different price recordings, chart styles and decide which you like best to analyze the price history. To begin with, please note that the bid and ask prices represent the prices at which a trader can buy or sell a currency. Traders always look to buy low and sell high. This means that traders sell currency in anticipation of depreciation and then buy it back at a lower price with the anticipation that it will appreciate in value. Here are some ways to read forex pricing ticks. Hopefully, these chart explanations will help you understand which might work well for you as you aim to trade better.
Line charts
You may have used line charts in grade school. A line chart is made up of two axes, one perpendicular to the other. The horizontal axis represents pricing change over time the vertical axis represents the price of a particular currency against another. To read forex pricing, it is essential to understand how these axes relate to one another.
Line charts show the prices of underlying currency pairs in a simplified way. They allow you to identify large-scale patterns and overall trends. They also help you to determine short-term trends. For example, line charts are useful in identifying price recovery after a sell-off. They are also useful in detecting trend lines, although they can’t give you a price range. This is one of the main reasons why many forex traders rely on the underlying price of currency pairs.
Mountain charts
There are two different types of financial charts: line charts and mountain charts. The only real difference between these two types of charts is the appearance, as they show similar information. Like the name suggests, mountain charts look like the side of a mountain. The space below the line is filled with color, revealing major price changes. Listed below are examples of both types of charts.
Mountain charts are useful for capturing a long-term trend, they also present an optical illusion of greater growth.
Candlestick charts
Using candlestick charts to read prices can be extremely helpful for those who wish to understand pricing activity in the market. To add to this, there are different common candlestick patterns that can help you guess what the price might soon do. Understanding these patterns is important if you want to make profitable trades. For example, a large bullish bar indicates that buyers have taken control of the market, so price will probably continue to move upwards. However, it’s important to remember that candlestick patterns can sometimes be misleading. To avoid making the same mistake twice, here are some important things to keep in mind when reading them.
One of the most important things to understand when reading candlesticks is the position of the open and close. The open and closing prices of an asset are represented by the open and close points of the candlestick. Depending on the market, a bear market will close below the open, while a bullish market will close above the open. However, in order to understand which candlestick to follow, it’s essential to understand their location on a chart.
Direct quotes
The primary purpose of a forex direct quote is to give you an indication of the value of a foreign currency in terms of another country’s currency when trading on the spot market. This form of quote is very easy to understand and useful for converting prices. For example, if a European citizen was traveling to the United States and EUR/USD was trading around 1.23456, if they wanted to buy a laptop there (i.e. where he would need to pay in USD), he could simply divide the price (The USD price) by 1.23456 to understand how much it was equivalent to or costing him in Euros.
Conclusion
Another important factor to consider when reading currency quotes is the position of the “country code” in the currency pair being traded. For example, a direct quote for Euros to United States Dollars (i.e. that is EUR/USD), such as 1.1404 EUR/USD would mean 1.1404 US Dollars for 1 Euro. In contrast, a direct quote for US Dollars to Japanese Yen would be USD/JPY and for an example, 114.04 USDJPY would mean 114.04 Japanese Yen for 1 US Dollar.