There is one very important factor that you should consider
with great care if you are willing to become a successful,
profitable Forex trader. This ever important factor that must be
always present in the trader?s portfolio, is the ability to read
the charts. The beauty of FOREX charts, as opposed to charts
used for, say, daytrading stocks, is that they are pretty easy
to interpret and use. They're a reflection of a slower-moving,
stable economy (the one of a country) compared to the future and
daily drama of company reports, Wall street analysts and
shareholder demands. And, unlike stocks, currency charts rarely
spend much time in tight trading ranges and have the tendency to
develop strong trends (even though the FX market may be
volatile, it's more predictable). And, rather than tens of
thousands of stocks to analyze, you only have a few mayor
currencies to trade. The most common types of price bars, used
in FOREX trading, are the Bar Chart and the Candlestick chart:
Bars Charts - Price bars are a linear representation (a line)of
a period of time. This enables the viewer to see a graphic
representation summarizing the activity of a specific time
frame. For example they can be one minute or five-minute time
intervals depending on the system you are using. Each bar has
similar characteristics and tells the viewer several important
pieces of information. First, the highest point of the bar
represents the highest price that was achieved during that time
period. The lowest point of the bar represents the lowest price
during the same period. Regular bars display a small dot on the
left side of the bar which represents the opening price of the
period and the small dot on the right side represents the
closing price of the period. Candlesticks - Japanese
Candlesticks, or simply Candlesticks as they are now known, are
used to represent the same information as Price bars. The only
difference is that the difference between the open and close
form the body of a box which is displayed with a color inside. A
red color means that the close was lower than the open, and the
blue color represents that the close was higher than the open.
If the box has a line going up from the box it represents the
high and is called the wick. If the box has a line going down
from the box, it represents the low and is called the tail. Many
interpretations can be made from these "candlesticks" and many
books have been written on the art of interpreting these bars (
Visit: http:www.1-forex.com). So, the
main thing to keep in mind between the two types of price charts
is this: Candlestick charts are similar to bar charts in that
the top tip of a vertical line represents the high and bottom
tip represents the low. However, market activity between the
OPEN and the CLOSE is represented differently by the use of
candlestick bodies. Because of their colored bodies, candles
provide greater visual detail in their chart patterns than bar
charts. Which is why many experts recommend you become
intimately familiar with Candlestick charts.
About the author:
Freelance writer with articles published in a number of places.
You can learn more about Forex trading and its great advantages
over other kind of business at this useful website: http:www.1-forex.com).
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