Forex charting is widely used by technical analysis school known as “chartists”. Charts provide an easy, visual approach to trading the forex market.
Many legendary Wall Street traders use charting as part of their overall trading strategy. Some implement charting over fundamental information, where charts provide information on whether a particular information has been priced into the currency pair or not.
FX charting for trading calls is an approach that should be used with caution. Even though the rules of technical analysis based on charting are mostly easy to implement, back-testing these rules is not.
Using Forex Charting – Pattern Recognition
Most of the FX charting-based trading rules are based on pattern recognition. For example, when the currency pair moves through a price level known as resistance, this can be interpreted as a buy signal.
The resistance and support lines can be derived from historical lows and highs, or from other measures, such as Fibonacci numbers.
There are also different approaches as to how a price moves are described. Some traders use closing prices, while other use the full scale Open, High, Low, Close (OHLC) to determine price movements within a time frame.
Even if you don’t intend to make any trading calls based on charting, you’ll probably find discussing the market situation much easier if you support your forex market analysis with a visual chart.
Learning Forex Charting
Forex charting for technical analysis is taught in most institutions offering forex basics and currency trading education.
There are many companies offering trading courses with charting lessons. Here's a small sample of these firms you might want to take a look at:
- Market Traders Institute
- Concorde Forex Group
- Trader House Network
- Euromoney Training Group
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