Right Method to Read Charts in Forex Trading System

Various types of forex charts are used in forex trading according to the system one is using such as line charts, OHLC charts or Japanese Candlestick charts.

Always keep in mind that same order is used for any currency pair. For instance, the USDCHF will always be quoted in the same way wherein the USD i.e. US Dollar will remain the base currency and CHF i.e. Swiss Franc will remain the terms currency always.

So, when you will see a USDCHF chart, you will find existing 1 minute candle fluctuating around 1.3127. It clearly implies that US Dollar is equal to 1.3127 CHF (approximately). It is an uptrending chart of CHF.



Let us have briefing on how these commonly used forex charts are read in forex trading system.

Let’s take the example of downtrending chart of GBP.



Basically you need to consider certain things to read charts in forex trading system right. These are:

• Know that if you go long which means if you buy, any of the currency pair; if the chart moves upwards then it means that the trade will be in your direction. It means that the base currency is getting stronger against the term currency.

• In another situation, if you go short which means that if you sell the currency pair; in that case your preference would be in the fall of currency price which will be trend down in the chart so that the trade moves in your direction.

• Always look at the time frame displayed on the chart. In the given illustration, it is 5 minute chart of currency pair USD CHF. Also, you might need to look at more than one time frame in some of the trading systems.

• Always remain aware to the fact that it is the bid price that is applied on any chart whether it is OHLC or candlestick chart not the ask price. Always consider this whenever you are placing buy orders while considering the prices mentioned at the chart. It is crucial as when buying it is the ask price that is used not the bid.

• So, when you purchase at market, the purchasing is being done at the offer which includes chart price as well as the spread.

• You must know that the times displayed on the bottom of the chart are displayed according to the time zone in which the force charting software is set to. Some may be set to GMT while some of them may be set at New York Times or other time zones.

• In the end, check if the time displayed at the bottom is corresponding with the opening and closing of the candle. In the above shown charts, the corresponding time to the closing of the candles is at GMT time.

To conclude, if you are new to forex trading system, it is important that you learn to read and understand forex charts used in forex trading system to use them properly.