Forex Traders Learn How To Interpret Forex Charts

There are a lot of different tools in the forex trader's toolbox and one of the most important important is the forex chart. Simply put, a forex chart is a graph of the performance of a currency pair over a set period of time. Reading a forex chart is crucial to any trader’s business and so it is important to be able to read them and to understand just what they mean.

A forex chart is created for a currency pair like the EUR/USD or GBP/CAD and shows the prices of the two currencies concerned against one another over a period of time. For example, a EUR/USD chart tells you how the US dollar and Euro have moved against one another over the period of time for which the chart has been plotted.

Across the base of the chart you have the timeline that can for example be divided into 15 minute, one hour, one day, one week, or longer periods of time. Then running up the right-hand side of the chart are incremental values that are generally fixed to run from a bit below to a bit above the bottom and top prices attained during the period in question. For a EUR/USD chart for example the values might run from 1.2534 at the bottom to 1.2567 at the top.

The forex chart is valuable because it paints a clear and simple to read picture of just how a currency pair is doing and you can see at a glance whether a currency is getting stronger or weaker so that you can take action accordingly. Selecting a time frame for a chart is also important as a short time scale can help you to spot minor trends while a long time scale can help you to spot longer term trends.

You can find free forex charts across the Internet on numerous websites and many of these will even let you put charts on websites of your own. These free charts are alright for looking at trends occasionally but dedicated traders will have to have access to far more detailed charts that are constantly being updated in real time. In essence this means having access to appropriate trading software that operates on a broadband internet connection so that you are always online. Anything less than twenty four hour access to the latest charts covering a wide range of currencies will make life very difficult for the dedicated trader.

With dozens of the world's currencies being traded each day there are far too many currency pairs for anybody to track of them all mentally and the beauty of the right forex software is that it permits you to view multiple forex charts to indicate at a glance what your favorite currency pairs are doing. Naturally you will want to keep a close eye on those charts showing currencies in which you have already made investments, but you are also going to want to keep track of other currency pairs which you might want to trade in if they move in a favorable direction.

Being able to easily and quickly follow the movements of a wide variety of currency pairs means that you are far less likely to miss a trading opportunity that could so easily pass you by without access to the right forex charting software.